Your Credit Report Now Includes Information About How You Pay Your Bills
When lenders give you money, they want to be sure you can get it back. If they think you are a “risky” borrower, this will affect the terms of your loan. And now, lenders can look at how you pay your bills to decide if you’re at risk.
Finance writer Liz Weston explains that credit reports now tell lenders if you pay your credit card in full each month. If you do this, you will be considered a low-risk “party to the deal”. On the other hand, if you have a scale, you are considered a high-risk “revolver”. Weston writes:
Some lenders use this information to determine what types of credit cards and loans to sell to people, while others are starting to use the differences when making decisions about granting a loan in general, as well as what rates and conditions to offer. Fannie Mae stated … that mortgage lenders will be required to use this so-called “trend credit history data” when making loan decisions that began in mid-2016. This change could help people with lower credit ratings get mortgages if they have a history of paying off their cards … This is in contrast to the credit ratings currently used in most lending decisions, which do not differentiate between people who have which have loan balances. cards and those who pay for them. These companies have confirmed that the latest versions of FICO’s leading credit rating formula and its main competitor, VantageScore, do not include payment trends.
So, while the data is not included in your rating, lenders can see what your credit habits look like in the reports of the three major bureaus (TransUnion, Equifax, and Experian). Of course, it is always wise to pay off balances for your own financial good, but this is one more thing to keep in mind if you are renewing your loan. For more details, check out the full report at the link below.
COLUMN – How You Pay Your Bills Can Affect Your Credit | Reuters