The new FICO 08 credit scoring model is out, and over 400 lenders are already using it.
The credit scoring model was redesigned to give lenders a better idea of your credit risk.
Will it help your score?
Here are some key features:
- Collections under $100 will no longer hurt your score. This means a medical bill you never got, or a small utility bill you didn’t pay will no longer undo months of paying all of your (other) bills on time.
- The new model will be more forgiving of people that had a single major problem two years or more ago, but otherwise their accounts are in good standing.
- The new credit scoring model will put an end to piggybacking. This is an unethical practice, very often suggested by unscrupulous credit repair companies, where people paid someone they didn’t know to become an authorized user on their accounts. A spouse or a child are the only people that can be added as authorized users and receive credit reporting benefits.
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It is estimated that as many as 145 million people in the United States used credit cards. Slightly less than half of these people use these cards to supplement their life style and carry a balance from month to month.
Sure, you know that you are being charged interest. But do you understand other ways in which credit card companies charge you fees?
Here are some things to look out for:
Introductory Rates – You get an offer in the mail, and it seems too good to be true! Zero %, it doesn’t get any better than this! Six months later, you are shocked to open your bill and find that your interest rate is now 21%. What happened? It is likely that you were lured into a teaser rate.
Low Minimum Payments - If you are strapped for funds, a low minimum payment can seem like a good thing. In reality, many cards have minimum payments so low that you aren’t even touching the principal. If you make only the minimum payment, you will be paying interest forever!
Universal default: This is where your interest rate can be increased, even if you have been paying an account on time. Why? If you fall behind on other credit accounts, many creditors have a stipulation that allows them to increase your rate up to 29%.
Interest on Balances Already Paid: Many credit card companies will charge you interest even if you have paid the balance already! For instance, if you charge $1,000 and pay $900 immediately (before the billing cycle ends), many creditors will charge you interest for the month on the entire $1,000!
Late Fees: Many people don’t realize how costly paying your credit card late can be! Many companies charge fees of up to $40 and will also increase your interest rate immediately. (Often to the max allowable of 29.9%!)
Other Fees: Always read the fine print, and watch out for any fees! These can include application fees, processing fees, transaction fees, over credit limit fees and balance transfer fees.
Changeable rates: Some credit card agreements give the lender the right to change your rate for no reason at all!
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