Changes are coming to the FICO 10 Scoring Method that might drop your credit score - here is everything you need to know, enjoy! Add me on Instagram: GPStephan
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What currently impacts your score:
On-time payment history, which makes up 35% of your credit score.
This means that you always pay your debts on time, as agreed - without ever missing or being late on a payment.
The second largest impact is what’s called THE AMOUNT OWED - which makes up 30% of your credit score.
This is otherwise what’s known as the “Utilization Rate” - which means how much credit you have available, versus how much of that you’re actually using.
Third, we have the AGE OF YOUR CREDIT - which makes up 15% of your score.
Overall, lenders see that the longer you’ve had your accounts open for, and in good standing - the better the chances that you will be a responsible, experienced borrower.
Then, fourth - we have the TYPES of credit you have - which makes up another 10% of your score.
This means that lenders want you to have experience handling MULTIPLE types of loans, just to prove to them that you’re a financially independent adult who don’t need no credit.
And finally - we have the remaining 10% of your score, which is calculated by the number of credit inquiries you have.
Generally speaking, the more hard inquiries you have - the lower your score will be, BECAUSE lenders are worried that you’re out there actively trying to seek new loans and credit - and because of that, you’re seen as a POTENTIALLY riskier borrower.
And that brings us to the new FICO 10 Scoring Method:
The biggest change is that FICO 10 will be able to look into your spending habits for the last 24 months and determine, from that information, if you’re a risky borrower. The most notable of this is that they’ll be able to see if your spending habits have been steadily INCREASING, if your account balances are getting higher every month, or how often you’ve been maxing out your accounts.
Second, the new FICO scoring method will be able to see if your credit usage is INCREASING over time.
This new scoring method will weigh personal loans much more heavily, and that would likely bring down your score. This new scoring method will also be able to calculate if your debt is INCREASING over time, or if the amounts owed are steadily going up - and lenders would be able to take that into consideration to determine whether or not you’re a potential risk.
Third, on a GOOD note, FICO actually made an IMPROVEMENT to the credit scoring system, and they won’t be penalizing you for TEMPORARILY maxing out your account or holding a one time high balance.
They’re going to analyze the last 24 months of your account history, and any sudden “blips” of high spending won’t count against you, like if you had a big one-time purchases, or happened to make a lot of charges around a single time .
Now, in terms of what you could do about it:
FIRST: Always pay off your credit cards in full by the time they’re due.
Nothing changes here - I’ve been saying this before, and I’ll continue saying it - credit cards should not be seen as a way to borrow money. Instead, you should always opt to put normal spending on the card and use credit as a buffer between your spending, and your actual money.
SECOND: Don’t be afraid to take out MORE CREDIT
I know this sounds completely counter-intuitive…but, when lenders want to see a consistently small outstanding account balance - it HELPS to have more credit available to you, even if you aren’t using it. This is because, like I mentioned, 30% of your credit score is calculated from “amounts owed,” which is your utilization rate…and the higher the percentage is, the lower your score.
AND THIRD: I think this goes without saying…don’t take out personal loans and then rack up more debt on credit cards.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available.
Get 2 Free Stocks on WeBull when you deposit $100 (Valued up to $1400): https://act.webull.com/k/Vowbik9Tm5he/main
NEW: JOIN THE WEEKLY MENTORSHIP - https://the-real-estate-agent-academy.teachable.com/p/graham-stephan-mentorship-program/
The YouTube Creator Academy:
Learn EXACTLY how to get your first 1000 subscribers on YouTube, rank videos on the front page of searches, grow your following, and turn that into another income source: https://bit.ly/2STxofv $100 OFF WITH CODE 100OFF
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
What currently impacts your score:
On-time payment history, which makes up 35% of your credit score.
This means that you always pay your debts on time, as agreed - without ever missing or being late on a payment.
The second largest impact is what’s called THE AMOUNT OWED - which makes up 30% of your credit score.
This is otherwise what’s known as the “Utilization Rate” - which means how much credit you have available, versus how much of that you’re actually using.
Third, we have the AGE OF YOUR CREDIT - which makes up 15% of your score.
Overall, lenders see that the longer you’ve had your accounts open for, and in good standing - the better the chances that you will be a responsible, experienced borrower.
Then, fourth - we have the TYPES of credit you have - which makes up another 10% of your score.
This means that lenders want you to have experience handling MULTIPLE types of loans, just to prove to them that you’re a financially independent adult who don’t need no credit.
And finally - we have the remaining 10% of your score, which is calculated by the number of credit inquiries you have.
Generally speaking, the more hard inquiries you have - the lower your score will be, BECAUSE lenders are worried that you’re out there actively trying to seek new loans and credit - and because of that, you’re seen as a POTENTIALLY riskier borrower.
And that brings us to the new FICO 10 Scoring Method:
The biggest change is that FICO 10 will be able to look into your spending habits for the last 24 months and determine, from that information, if you’re a risky borrower. The most notable of this is that they’ll be able to see if your spending habits have been steadily INCREASING, if your account balances are getting higher every month, or how often you’ve been maxing out your accounts.
Second, the new FICO scoring method will be able to see if your credit usage is INCREASING over time.
This new scoring method will weigh personal loans much more heavily, and that would likely bring down your score. This new scoring method will also be able to calculate if your debt is INCREASING over time, or if the amounts owed are steadily going up - and lenders would be able to take that into consideration to determine whether or not you’re a potential risk.
Third, on a GOOD note, FICO actually made an IMPROVEMENT to the credit scoring system, and they won’t be penalizing you for TEMPORARILY maxing out your account or holding a one time high balance.
They’re going to analyze the last 24 months of your account history, and any sudden “blips” of high spending won’t count against you, like if you had a big one-time purchases, or happened to make a lot of charges around a single time .
Now, in terms of what you could do about it:
FIRST: Always pay off your credit cards in full by the time they’re due.
Nothing changes here - I’ve been saying this before, and I’ll continue saying it - credit cards should not be seen as a way to borrow money. Instead, you should always opt to put normal spending on the card and use credit as a buffer between your spending, and your actual money.
SECOND: Don’t be afraid to take out MORE CREDIT
I know this sounds completely counter-intuitive…but, when lenders want to see a consistently small outstanding account balance - it HELPS to have more credit available to you, even if you aren’t using it. This is because, like I mentioned, 30% of your credit score is calculated from “amounts owed,” which is your utilization rate…and the higher the percentage is, the lower your score.
AND THIRD: I think this goes without saying…don’t take out personal loans and then rack up more debt on credit cards.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available.
I have a feeling that Graham has a YouTube algorithm shrine in his home 🤔
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Great video
due student loans count against your credit score
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I’m not done yet, do I stop at a year? Idk yet
MINE JUST DROPPED BY 17 FUCKING POINTS WITH 0 LATE PAYMENTS
I bought an item of $3800 on a $7000 CL and my score dropped 39 points, even though I paid in full way before receiving a statement. I’ve waited a month after and it stayed the same.
Credit Scores, in the age of rampant ID theft & mass credit hacks, are absurd. It’s just an excuse for a lender to charge you massive interest Don’t use online banking, make purchases online, yet my Identity was stolen TWICE And forget about contacting all 3 Credit Agencies, you can only contact Experian, who ‘say’ the other two agencies will adjust. And I’m not some novice, in my early 30’s and have been set backward because of Identity theft and back credit score but I got all fixed using SAMHACKSTECHNOLOGY⏺NET , you can check them out.
if personal loans will be negative, should I still use credit builder accounts like self lender
If someone has $4k in collections from 5yrs who, why even pay it off? It’s going to be negative for another 2 yrs anyway.
I lost points from 716 to 649 I’m like how !
WASTE OF TIME WAY TOO MANY ADS.
Why are you screaming – negative I also SMASHED THE NOT LIKE BUTTON
I think CapitalOne is now using the FICO 10 scoring method. I had a score over 775 and randomly it went down to 750, through no changes to my history (if anything, I've been paying off balances to near completion more recently!)