News

If you’re still looking to buy one of our Orange County homes for sale, then you already realize how important your credit score is in determining whether you get a mortgage and what payment terms you end up with. Big changes are coming to how that all-important number is coming. They’re being implemented later this year by VantageScore Solutions, an organization created by Equifax, Experian, and TransUnion, the big-three credit bureaus. If you’re making an effort to become more financially responsible, these modifications should mean good news.

Trended Data

Trended data looks at what your debt is heading from month to month. In other words, whether you’re accumulating more debts or eliminating them as time goes by.

• If you’re minimizing your financial obligations by paying down as much of what you owe as possible, your score will improve.
• If you’re paying only the minimums on your credit cards and loans while continuing to accumulate more debt, you score will go down.

To take advantage of this change, pay far more than the minimum requirements on your loans until you reduce or eliminate your obligations.

Available Credit

Previously, the more credit you had, such as by opening and carrying multiple charge cards, the better it was for you because you have more access to money. So you’d get a high score if you had $100,000 in credit from 10 cards with a $10,000 limit on each. Financial gurus encouraged you to keep your credit cards open, whether you used them or not just so the extra credit would increase your score.

However, the changes now penalize high credit limits because you could run up high credit card debt quickly, which you may then have problems paying. Fewer obligations, whether actual or potential, are now better.

Start closing any credit cards you don’t use. While the exact number that you should have is still a question mark, many credit experts feel that having six or more is excessive and that owing money on four or fewer cards is better.

Bad Judgments Don’t Count

Civil judgments, tax liens, and medical debt used to be stains on your financial reputation, negatively affecting your score for about seven years before they were removed from your credit report. The big three credit bureaus were sued by 31 state attorney generals who argued that these indicators were often full of errors. For example, medical debt often appeared on a credit report before insurance had time to cover the debt. In 2015, both the credit bureaus and the attorney generals settled by agreeing to take civil judgments, tax liens, and medical debts out of the scoring equation.

You don’t have to do anything to take advantage of this change. But if these bad judgments affect your credit score and are subsequently eliminated, expect your score to go up by as much as 20 points.

Checking Your Score

If you don’t know what your score is at the moment, the first place to check is with your credit card company or financial institution. As part of their services, many such providers will give your credit score for free, if you just ask.

If they don’t, browse Credit Karma, which will not only give your free credit score but let you look at your credit report as well, so you can see the sources of your numbers. You may also get one free credit report per year from each of the credit bureaus by heading for AnnualCreditReport.com. Note that these free reports do not include scores.

Are you looking for a new home in Orange County, Long Beach or the Los Angeles metro area? Brandywine Homes is opening six new communities this year offering a combined 265 single-family homes and townhomes. If you would like more information, sign up for our interest list here.