If you’re interested in how your credit score might be going up or down in the coming months, then this is for you.
I have several news items to share. This comes from two top employees of VantageScore. The information was prepared — not for consumers or even credit repair businesses — but for lenders! It’s a warning to lenders on what’s happening and what’s to come. But, it’s fascinating for the rest of us, too!
Here we go!
1 Right now, more people are going late on their accounts. The warning was for lenders to be on the watch so they could adjust interest rates accordingly. This tells you that if you pay one day late on a credit card, expect all the other credit card companies to notice and raise your interest rate.
2 More people are accruing late payments because during the pandemic (a) they received forbearance so the creditors didn’t report them as late — as long as they began paying on time again after, and (b) with everything shut down, there wasn’t as much to spend money on. No movies, concerts, restaurants, sporting events, etc. More people saved money and/or paid down their balances during that time.
Now, inflation has hit, insurance rates have risen, and all payments are due — not to mention more things are available to spend money on.
3 Due to #2 above, credit scores in the United States went up in 2020 – 2021. Now with new late payments, the trend is downward for scores.
4 The Supreme Court struck down the Biden Administration’s plan to forgive over $1 trillion in student loan debt. Therefore, student loans that were on hold will restart with payments required October 31st.
5 If a person fails to pay their student loan this fall when it’s due, VantageScore is forecasting a drop in the person’s credit score of 49 to 82 points. Wow, that’s a serious penalty you don’t want, so get prepared now.
6 If a person pays their student loan bill on time, the first months, VantageScore is forecasting an increase of 8 points in their score. It might not sound like a lot, but going from 695 to 700+ puts you into a higher tier for credit approval and pricing. Plus, what can you expect for doing something you are contractually obligated to do anyway — pay as agreed?
VantageScores are used by many credit card companies and lenders now; but the mortgage lenders are still in line for converting from using Experian, Equifax, and TransUnion into using VantageScore plus one of the other three. It’s on the calendar for mortgage lenders to go from a tri-merge report to a bi-merge report, but the date is still fluid.
Feel free to post a comment on this topic, and thank you for reading.