Agencies are Improving Their Credit Score Calculations. What It Means for You.

Credit rating agencies have models they use to calculate your score. You should pay attention to those models because, if you understand them, you have a better chance of keeping your credit score high. With a higher credit score, you have a better chance of getting loans from lending agencies or easily renting an apartment.

Now, agencies are improving their credit score calculations. You might wonder what that means for you. We’ll discuss that in detail right now.

Utility Bill Payments and Rent

With the new scoring models that credit agencies are implementing, you can improve your score by paying your rent and utilities, provided you sign up for a service that reports those payments to the agencies. If you’ve ever wondered do utility bills affect credit score, you’re in luck, because now, they can.

To take advantage of this option, you must research the different tools that are out there and pick one, like Experian Boost. This is a tool that reports to credit agencies when you pay your rent or utility bills, and you do not get charged a fee for it.

That’s the critical difference between these tools and those that came before. Previous versions reported the paying of rent and utilities to the credit agencies, but you had to pay for them. Now, when you sign up, you’ll pay nothing, but you should still see your score increase across Experian, Equifax, and TransUnion.

Medical Debt

Your credit utilization ratio plays a part in the credit agencies calculating your score. Credit utilization means the total amount of credit you have available versus how much you’re using. To keep your score high, you should use as little credit as possible.

In the past, your medical debt came into play when the agencies calculated your score. Last year, though, a change was implemented. Now, credit bureaus will not calculate your score by using paid medical debt. They will also give you a six-month grace period before they count any unpaid medical debt against your credit score.

That can make a huge difference since medical debt is one of the primary reasons why some consumers have lower credit scores. Most people can pay back their medical debt in six months, or at least some of it. Less medical debt means a higher score.

There’s also an additional change that the three major credit bureaus are doing this year. Soon, Equifax, TransUnion, and Experian will no longer count medical collection debt against your score that’s less than $500.

These Changes Should Help the Average Consumer

Many consumers should feel better knowing these changes have begun and more are coming. The three main credit agencies giving individuals a six-month leniency period before they start counting medical debt against their credit score should make a big difference. You should also like that these agencies will soon stop counting medical collection debt under $500 against your score.

Also, the three main credit agencies have made it easier to report the payments you make for crucial bills, such as your utilities and rent. When you sign up for a free service like Experian Boost, you can report those payments, and you should notice your score start to rise quickly after that.

The fact that these services no longer cost money incentivizes signing up for them, and you should do so, particularly if your credit score is not so great. When you sign up for one of these services and pay off your medical debt expediently, you could see a credit score difference of a hundred points or more.

That’s the kind of change that can make a real difference when you’re trying to secure a loan, rent an apartment, or sign up for a new credit card.