Credit Score News, Tips & Advice
Website CertifiedPrivacy Protected
Credit Score News, Tips & Advice « Credit Scores > Credit Score News > Latest Credit Rating Method Gives More Room for Errors

Latest Credit Rating Method Gives More Room for Errors

By Sally Maison
Published: Saturday, October 31st, 2009

Many consumers are worried that their $50 parking fine which they forgot to pay a couple of years ago will continue to affect their credit score for seven to ten years. Even if the penalty has now grown to $200, it will still no longer impact consumer rating. That is because FICO08, the newest credit scoring method from Fair Isaac Company, does not count unpaid debts which started below $100. But experts say there are still consequences for not paying small bills, even if it does not affect a credit score.

Latest Credit Rating Method Gives More Room for ErrorsSmall collections do not affect a score, but they will still mark as negative items on a credit report. For any credit application, a lender will always thoroughly examine a person’s payment history before approval. A consumer who has a good credit score but habitually neglects small bills may find some difficulties getting a mortgage or car loans. Experts say if he does get a loan, it would only be after being scrutinized for those unpaid bills.

Companies, public libraries, and lenders of every sort report every unpaid bill to the three major credit bureaus. Small bills may not hurt a consumer rating but experts warn that they could hurt one’s chances of getting a loan, especially now when creditors still refuse to slacken their tight lending standards.

Experts also warn consumers that bills that began at $100 will still significantly affect their rating. Consumers are advised to avoid neglecting bills since every late or delinquent payment that is worth $100 or more have substantial impacts on a score. They explained that FICO keeps track of all sorts of debts, including credit cards, debt collections, personal loans, student loans, and mortgages. Specialists say it is impossible to determine the extent to which an unpaid $100 debt could impact a score since FICO scoring is a very complicated system.

As explained by experts, an unpaid $100 debt will have lesser impacts on a person with longer payment history than a college student who has just started out his financial life. Small unpaid debts will also have small impacts on a person who has paid his bills promptly over the last five years or so.

Experts say that small bills can easily be forgotten so they advise consumers to utilize their credit sparely just in case they miss out on a $100 debt. But they tell consumers that it is best to keep track of their debts weekly so they do not avoid missing out on bills, even the smallest ones.

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.