FICO score changes could hurt Americans already facing debt issues
The creator of FICO credit scores is enacting changes in how it rates consumers' debt levels and their speed of repayment, the Wall Street Journal reports.
Why it matters: The decision, which impacts the most widely used credit score in the U.S., could lower the scores of those who fall behind on loan payments, sign up for personal loans or have rising debt levels, likely making it harder for many Americans to get approvals for loans.
- Consumers with high scores already will likely receive higher scores than under previous FICO versions. Meanwhile, people with low scores who continue to miss payments or accumulate debt will experience larger score declines.
- Fair Issac Corp., the creator of FICO scores, said the alterations will produce a larger gap between consumers with good and bad credit risks.
The big picture: Up until now, FICO and other credit-reporting companies embraced changes that helped increase scores, such as removing certain information from credit reports.
- The about-face reflects U.S. lenders losing confidence in the U.S. economy.
- Though the U.S. is experiencing its longest period of economic expansion and unemployment has fallen to a 50-year low, consumer debt is soaring.