Here’s how these new changes could impact your credit score.
If your credit score is haunted by tax liens or civil judgements, change is coming, and it could benefit your credit score.
The Credit Reporting Agencies (CRAs) are dismissing all civil judgements and a portion of tax liens that do not satisfy new data standards. Credit Agencies will be updating their databases during the week of July 10. A minimum of 60 percent of tax lien data will be removed. For VantageScore™ 3.0, the credit model that AutoPayPlus provides to its customers free of charge, the impact is minor but worth noting.
Approximately nine percent of the population has either a tax lien or a civil judgement reported on their file. Slightly more than eight percent of the U.S. population received a change in score when the impact of the change to VantageScore™ 3.0 was tested. The average score increase was 10 points.
Aside from new data collection standards, the VantageScore™ credit model and the importance of its credit factors remains as follows:
Payment History – Be sure to pay your bills on time every month. If you habitually miss your monthly payments, consider automated payments
Age and Type of Credit – There’s not much you can do about the age or length of your credit history, but you can diversify your accounts which may consist of mortgage, car loans or credit cards.
Percent of Credit Limit Used – Keep your credit use to a minimum. It is best not to exceed 30 percent of your credit limit. If you’re having trouble meeting this ratio, you can request a credit line increase.
Total Balances/Debt – Keep your credit use light and work on reducing your total debt owed.
Recent Credit Behavior and Inquiries – Don’t open multiple accounts at once. Gradually incorporate new accounts. Also, try to prevent allowing companies to conduct hard inquiries on your credit profile as that can lower your credit score.
Available Credit – Set your limit to the amount that you need, not what you want.
According to VantageScore™, 89 percent of consumers are without tax liens or civil judgements but debt haunts the credit scores of many. Achieve the credit score you want by paying off your debt faster. Automated biweekly payments are a good option to ensure timely repayment and pay down debt faster. Paying off your debt at a consistent rate can assist with your credit utilization ratio and over time, increase your credit score.
At AutoPayPlus, we like to keep our customers informed of changes in their services and equip them with the best tools for financial success. Be sure to log in to your website account once a month to automatically update your credit score and view the credit trending graph to see how your efforts are improving your credit score. A good credit score is a key to a brighter financial future.