Urgent Credit Score Changes

Credit changes will be effective March 17th 2025

Beginning in March 2025, significant changes will affect credit reporting and scoring. These include the elimination of medical debt from credit reports and the implementation of new credit scoring models. The goal of these changes is to enhance consumer financial well-being and shield individuals from potentially detrimental debt collection practices. As Beverly mentions in the video, these changes could influence your personal credit, your business operations, or how lenders currently perceive you.

New Credit Scoring Models:

FICO 10T and VantageScore 4.0. are replacing older models, integrating more data and a 24-month trended view of borrower behavior. This allows lenders to gain a more comprehensive understanding of your creditworthiness. By incorporating trended data through AI and other credit-related data, which reflect behavioral changes over time, scores offer a deeper analysis and understanding of consumers’ credit histories. Factors like unemployment, personal, and rental payments that aren't typically reported on credit scores are considered. You might know this as "Credit Booster", as credit apps and AI tools are leveraging these new credit changes to assist you in building your credit.

The new credit scoring models and credit score requirements have the potential to:

1. Expand access to credit for individuals with limited credit histories – With lenders now able to consider VantageScores alongside FICO scores, borrowers with less than six months of reported credit history might qualify for mortgages.

2. Extend access to credit for individuals with strong alternative credit data – 26 million Americans lack sufficient traditional credit data to generate a credit score. This might be because they’re young, recently moved to the United States, or prefer using cash and debit cards instead of credit.

   
   

Bi-Merge Credit Reporting:

Lenders can now use credit reports from just two of the three major credit bureaus, rather than three. This is expected to lower costs and increase competition among credit reporting agencies. Despite the potential benefits, there are some downsides that may arise from these changes. For instance, if the lenders decide to use the lower of the two credit scores, this may negatively impact some borrowers’ interest rates, loan terms, and Loan Level Pricing Adjustments (LLPAs)

Medical Debt Removal:

A new federal rule, finalized by the Consumer Financial Protection Bureau (CFPB), will ban medical debt from credit reports and prevent lenders from using medical information in credit decisions. This rule will go into effect 60 days after publication in the Federal Register. 

These credit changes could lead to more affordable mortgages, increased credit score points for those with medical debt, and a faster path to building credit for individuals with shorter credit histories. The changes may also lead to a decrease in credit sore for some. Either way it is important that you check all 3 credit bureau, clean up your credit, start paying your bills on time, maintain a good credit ratio and avoiding unnecessary credit applications.

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