Latest news with #creditscore
The Independent
2 days ago
- Business
- The Independent
Your credit score might soon be impacted by Buy Now, Pay Later loans
Millions of Americans who rely on 'Buy Now, Pay Later' (BNPL) schemes for everything from clothing to concert tickets will soon see these short-term loans directly impact their credit scores, marking a significant shift in how consumer creditworthiness is assessed. Scoring giant FICO announced on Monday that it is rolling out a new model that will factor these popular payment plans into its consumer scores, which are used by the majority of lenders to determine a borrower's financial reliability. Previously, BNPL loans were largely excluded from credit reports, though Buy Now, Pay Later provider Affirm began voluntarily reporting 'pay-in-four' loans to Experian, a separate credit bureau, in April. The new FICO scores will become available to lenders as an option from the autumn, aiming to provide increased visibility into consumers ' repayment behaviour. However, widespread adoption may take time, as not all BNPL companies share data with credit bureaus, and not all lenders will immediately opt into the new models, according to Adam Rust, director of financial services at the non-profit Consumer Federation of America. The move comes as BNPL loans, typically structured as four interest-free instalments over six weeks with minimal or no credit checks, have become an increasingly significant part of the US credit ecosystem. FICO stated that its new model accounts for this growing trend. Julie May, vice president and general manager of business-to-business scores at FICO, said: "Buy Now, Pay Later loans are playing an increasingly important role in consumers' financial lives. We're enabling lenders to more accurately evaluate credit readiness, especially for consumers whose first credit experience is through BNPL products." FICO believes the new model will responsibly expand access to credit, particularly for younger consumers or those with limited credit histories. A joint study with Affirm, which trained FICO's new scores on over 500,000 BNPL borrowers, found that consumers with five or more loans typically saw their scores increase or remain stable under the new system. For those who consistently repay their BNPL loans on time, this could lead to improved credit scores, potentially enhancing access to mortgages, car loans, and apartment rentals. Currently, these loans do not typically boost scores, though missed payments can negatively affect them. However, consumer advocates have raised concerns. While BNPL providers promote these plans as safer alternatives to credit cards, critics warn of "loan stacking," where consumers take on multiple loans across various companies simultaneously. The previous opacity around this practice has led to warnings of "phantom debt" that could mask a consumer's true financial health. Nadine Chabrier, senior policy and litigation counsel at the Center for Responsible Lending, expressed concern that integrating these loans into scores could have unforeseen negative effects on individuals already facing credit constraints. "There isn't a lot of information out there about how integrating BNPL into credit scoring will work out," Ms Chabrier said, noting that while FICO's simulation showed some users' scores increasing, the overall consequences are hard to predict without more detailed modelling information. She cited research indicating that many BNPL users already have revolving credit card balances, lower credit scores, delinquencies, and existing debt, with women of colour disproportionately using these loans. "This is a credit vulnerable community," Ms Chabrier added. Despite the changes, Adam Rust does not anticipate an immediate "game-changer" for consumers with established credit profiles. "Are we at a point where using BNPL loans will dramatically alter your credit profile? Probably not," he said, explaining that the average BNPL loan is around \$135, and consistent repayment of such small amounts may not significantly move the needle on a credit score. "It's not about going from 620 to 624. It's about going from 620 to 780," he clarified, referring to the substantial score jumps that impact credit card offers and interest rates. Nevertheless, Mr Rust acknowledged that increased transparency around BNPL loans could create a more accurate picture of a consumer's debts, potentially improving underwriting and preventing individuals from over-extending themselves. "This addresses the problem of 'phantom debt,' and that's a good thing," he concluded. "Because it could be something that keeps people from getting too deeply into debt they can't afford." The shift comes as millions of Americans have already seen their credit scores decline steeply since March, following the resumption of student loan payments.
Yahoo
3 days ago
- Business
- Yahoo
What is credit history?
Your credit history is a record of how you have managed past debt and how you are handling ongoing debt. Your credit history is outlined in detail in your credit report, which also includes any liens, credit inquiries or bankruptcies. Credit history also helps to determine your credit score, a numerical value that indicates your creditworthiness to potential lenders. You can improve your credit history by practicing healthy credit habits, like paying your bills on time, which can also impact your employment and rental options, credit card terms and offers as well as other lending opportunities. Your credit history is a look at how you have managed your credit in the past. If you are in the market for a new loan (such as a home mortgage loan, a car loan or a credit card), looking for a rental or even searching for a job, your credit history can have a significant impact. Find out more about what a credit history is, why credit history matters and ways you can improve it. Think of your credit history as a financial record of your credit activity. Among other financial information, it typically includes the following: whether you pay your bills on time, how many credit cards and other loans you have, what types of credit you use and how much debt you carry. Any late payments are typically reported after 30 days delinquent, so you could have late payments that trigger fees with your card issuer, for instance, but are not reported. Your credit history is recorded in a document called a credit report, which provides information about how you use your credit accounts, including your payment history and account balances. The report also provides your identifying information, details on any collections and bankruptcies on your record and information about credit inquiries. Even child support or alimony payments are part of your credit history and can have a negative impact if you miss a deadline. Credit history versus credit score Your credit score and credit history are related but are not the same. Your credit score is based on and calculated using an algorithm that includes your credit history that is documented on your credit report. Three major credit bureaus — Equifax, Experian and TransUnion — generate credit reports, but they do not always record the same information in the same format. Each bureau uses one or more scoring models — typically FICO or VantageScore — to interpret the data it has collected and create your credit score. FICO and VantageScore have multiple versions; FICO 8 is the most commonly used credit scoring model. The information on your credit report (your credit history) goes into a mathematical model that generates your credit score, which is typically a number between 300 and 850 that indicates how likely you are to pay off your debt. Because each credit scoring model has its own methods and criteria, your credit score with each one may vary. But each model is attempting to do the same thing: predict your likelihood of repaying your debts, specifically for the financial product you are applying for. So responsible financial behavior is likely to translate to a good score regardless of the model. Using a report card analogy, your credit report would be the report card that documents your credit history, or how you did on all of your assignments for a semester. Your credit score would be an overall letter grade, such as an A+ or a D. However, note that you won't find your credit score on your credit report. To see your actual credit score, rather than the data that goes into it, you can check to see if the credit bureau offers a free credit score and credit report. You might have to provide some personal information, such as your Social Security number. You can also purchase a more detailed report and score directly from one of the major credit bureaus or a third-party service, or you may be able to get a free credit score from a credit card issuer such as American Express or Capital One (sometimes even if you aren't an account holder with that bank). Checking your own credit score shouldn't impact it since it's considered a soft check. Lenders use your credit history to help determine whether to approve you for a loan or a credit card, as well as the size of your credit limit. Your credit history also influences the interest rate or cost of the loan you would be eligible for. Say you have a limited or no credit history because you've never used credit or you're a young adult who is just starting out on your own. If you apply for a top-tier rewards credit card to help, you will likely be turned down due to insufficient credit history. On the other hand, a long credit history full of on-time payments and responsible credit use can help you qualify for the best credit cards or secure a mortgage at a favorable interest rate. You can get a full picture of your credit history by ordering your credit reports from the three major bureaus. You are entitled to a copy of your credit report for free from each of the three credit bureaus once a week. However, remember that these reports don't provide your score for free, only the data used to calculate your score. For your credit score, you'll need to purchase it from them or get it for free from credit card issuers and other services that provide it as a customer benefit. Reviewing your credit report can help you better understand your financial challenges and areas that need improvement. It's also good to ensure the information is correct. Sometimes credit reports contain outdated or incorrect information which can wrongly prevent you from receiving access to credit, loans and good interest rates. Here are some best practices to build your credit score and establish a strong credit history: Pay all of your bills on time, every time. Your payment history, which reflects whether you pay your bills by their due date, accounts for 35 percent of your FICO credit score. Late payments, usually reported when at least 30 days delinquent, will drag your score down. If you do have a late payment recorded on your credit report as part of your credit history but otherwise have a history of paying on time, you can reach out to your creditor and ask to remove it. This may or may not be successful, but it's worth a try. Keep your credit card balances low. The amount you owe compared to the total credit available to you accounts for 30 percent of your credit score. The less debt you carry, the better your score is likely to be. Generally speaking, it's good to use no more than 30 percent of your available credit. Strive to pay your accounts off in full before the end of every billing cycle, if possible. Since your credit utilization is typically calculated once a month, making an extra payment mid-month can help bring it down. Keep your oldest credit card account open. The length of your credit history — or, how long you've been using credit — makes up 15 percent of your credit score. A longer history is better for your score. That's why, although it may seem wise to close inactive accounts, it's a good idea to keep them open because they contribute to your length of credit history and bring down your credit utilization. Closed accounts that are in good standing can stay on your credit reports for up to 10 years. For instance, it's OK to close an inactive credit card account if it's racking up unnecessary fees, but otherwise consider keeping it open and using it once in a while. Don't apply for many credit cards within a short frame of time. New credit accounts for 10 percent of your credit score. This factor considers the number of new credit accounts you've recently opened, as well as the number of recent credit applications you've made. It's best to keep these to a minimum. However, when you're shopping for a big loan such as a mortgage loan or car loan, you do have a 'rate-shopping window,' which is a period of time within which multiple credit inquiries will be factored into your credit score just once. Maintain a diverse portfolio of credit. Your credit mix makes up 10 percent of your credit score and accounts for the different types of credit accounts you have, including revolving debt (like credit cards) and installment debt (like student loans and mortgages). Consider becoming an authorized user on a parent's/guardian's or spouse's/partner's credit card. When you're an authorized user, the primary cardholder's activity often gets added to your credit report. You don't have to use the card or even get a physical card to be added to the account, but this is a great way to build credit if you're starting from scratch … assuming the primary cardholder handles their card responsibly. Use a third-party tool. You could also turn to alternative credit-building tools such as Experian Boost and eCredable Lift, suggests Ted Rossman, senior Bankrate analyst. These types of services can give you credit for things that haven't historically counted toward your credit score, including rent payments, streaming service subscriptions and utilities. Your credit history is an important factor that tells lenders your creditworthiness, or likelihood that you will repay your debt in a timely manner. It's a record of how well you have managed credit, containing information on your credit accounts (such as payments) and any negative marks against your creditworthiness (such as delinquencies and bankruptcies). Check your credit report occasionally to make sure that your information is accurate since it informs your credit score. If your credit score isn't as high as you'd like, engaging in good credit habits can help you to build your credit score. Who can check your credit history? The credit bureaus can share your credit history as documented in your credit report to creditors, government authorities, landlords, employers, insurance companies, among other services that may need your credit history as outlined by the Consumer Financial Protection Bureau. For some requests, such as for rentals and employment, many states now require consent. What is good credit history? Good credit history is a positive credit report narrative indicating responsible use of your available credit, such as paying your bills on time. Negative input, such as late payments, can stick around on your credit report for up to seven years and cast a cloud on your credit history. One exception is chapter seven bankruptcy, which can linger for as long as 10 years. You can get fraudulent or erroneous information removed from your credit report, but everything else generally stays for a set period of time. Sign in to access your portfolio
RNZ News
3 days ago
- Business
- RNZ News
Is 420 the magic credit score number for a home loan application?
If you have bad credit, you might be wondering whether a bank will ever be willing to give you a home loan. A person's credit score reflected how well they had paid off credit in the past and how likely they were to be able to service their debts in the future. It takes into account factors like how long you have had credit accounts - that could also include things like power and internet bills - how often you make your payments on time, how much you owe on loans and credit cards, what types of credit you have, how often you ask for credit and any defaults or insolvencies in your history. There are three different credit bureaux in New Zealand but, for all of them, the lower your score, the poorer your credit rating. Centrix ranged from zero to 1000. It said anything below 496 was poor and about 10 percent of the population was in that range. Centrix noted people in this bracket were more likely to be rejected for a loan. Missed power or phone bills could sometimes impact a person's credit score. (File photo) Photo: Shutterstock / Allie Schmitz People with slightly better scores might get a loan but have extra conditions. For example, anything below 299 is low and 300 to 499 represented "room for improvement". David Cunningham, chief executive at mortgage advice firm Squirrel, said about 420 was the level at which banks would draw a line. "Some people's scores are way lower than expected. The biggest thing we see is missed minimum payments on credit cards over several months. "One-off has a negligible impact. It's when it becomes a deteriorating trend." He said people also needed to watch out for power bills and phone bills. Sometimes a missed payment could affect someone's credit without them realising, for example if they had moved house and not paid a final bill. But he said banks were generally open to an explanation if people could provide information about how they got into trouble. Another mortgage adviser, Jeremy Andrews at Key Mortgages, said it was a "blurry line" that borrowers did not want to push too far. "A score of 400 to 500 trending upward with good recent conduct might be better than a score of 500-plus with recent bounced payments or dishonours, unarranged overdraft fees. Any recent collection steps or agencies having to step in will be much harder to mitigate." He said other things could be easier to fix or explain. "Historical events affecting credit scores such as not paying bills on time, or just tipping into arrears, could be a short term problem and easily fixed. But if a borrower has not been paying either financial companies or property related bills such as property rates, on time every time, that can be a much bigger problem to resolve." Head of Link Advisory Glen McLeod said banks had internal thresholds. "That said, it's not just about the score itself. Lenders look at the full picture: what kind of credit issues are showing up, how recent they are, and what caused them. "Life events-like a separation, illness, or unexpected financial hardship-can reflect on your credit score, even if they were temporary. That context matters and can influence how a lender views your application. "If the credit history is too risky for a mainstream bank, non-bank lenders may still be an option. They tend to be more flexible, though that usually comes with higher interest rates to reflect the added risk." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
Arabian Business
3 days ago
- Business
- Arabian Business
Dubai residents can now instantly check credit scores online
Dubai residents can now check their credit reports and scores directly through the DubaiNow app, thanks to a new integration with the Etihad Credit Bureau. The collaboration between Etihad Credit Bureau (ECB) and DubaiNow, the UAE's leading unified government services app, allows users to access their personal Credit Report and Credit Score in real time with a single click—simplifying financial planning and enhancing digital accessibility. DubaiNow offers more than 300 integrated services from both government and private sector entities. With the new feature, users can log in to the app and instantly view their credit insights—supporting informed financial decisions and streamlining access to key personal data. Check your Dubai credit score Marwan Ahmad Lutfi, Director General of Etihad Credit Bureau, said: 'Etihad Credit Bureau is committed to advancing the UAE's digital transformation agenda by fostering integration across local government platforms. 'This collaboration with DubaiNow exemplifies our mission to simplify access to vital credit information while enhancing user experience. 'By leveraging advanced technology and seamless application programming interfaces (APIs), we've made it easier than ever to stay informed about your credit health through the digital channels individuals use most. The initiative aligns with the UAE's 'We the UAE 2031' vision, which aims to build a pioneering digital society. Matar Al Hemeiri, Chief Executive, Digital Dubai Government Establishment, said: 'We are pleased to announce the joining of Etihad Credit Bureau to the 'Dubai Now' application, enabling users to easily and quickly access their credit information anytime. 'This step embodies Etihad Credit Bureau's leading position and reflects its commitment to advancing the digitalization of life in the United Arab Emirates, thereby facilitating people's lives and supporting the foundations of the digital economy.' This is not the first time Etihad Credit Bureau has joined forces with a digital platform. The bureau's previous integration with TAMM Abu Dhabi proved successful, and this new partnership with DubaiNow underscores ECB's continued commitment to broadening access and efficiency across the Emirates. Benefits of the integration include:
Yahoo
21-06-2025
- Business
- Yahoo
5 million borrowers have now defaulted on their student loans — and data shows that number could soon double
Danielle Arnone, a Utah mother of two, has seen her credit score plunge 150 points this year because she and her husband were unable to keep up with the cost of living and pay back their federal student loans at the same time. 'It was shocking — made us sick to our stomachs,' she told KUTV 2 News in a story published May 28. 'The cost of everything — preschool, groceries, gas — it can be overwhelming. Now this? It's just a gray cloud that's always there.' Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 6 of the easiest ways you can catch up (and fast) Nervous about the stock market in 2025? Find out how you can access this $1B private real estate fund (with as little as $10) Arnone and her husband took advantage of the pause on federal student loan payments that began in March 2020. The pause ended in September 2023, however, the previous administration allowed for a one-year grace period to resume payments. Starting in January, past-due accounts were once again being reported to credit bureaus. On May 5, the government resumed collecting defaulted student loan payments. As a result, on top of taking a hit to their credit scores, millions of borrowers could face wage garnishments, withheld tax refunds and reduced Social Security benefits if loans continue to go unpaid. Here's what you can do if you find yourself in this boat. The U.S. Department of Education (ED) released some dismal data in April. More than 5 million student loan borrowers had not made a payment in over a year and were in default. A further 4 million borrowers were in late-stage delinquency — meaning that within a few months, nearly 10 million borrowers could find themselves defaulting on their loans. The ED also noted that 42.7 million borrowers owed more than $1.6 trillion, and only 38% of them were up to date on their student loan payments. During his term, President Joe Biden sought student loan forgiveness for millions of borrowers, however, many of his initiatives were rejected by the courts. This left many borrowers — who were already struggling with the cost of living — confused and unsure what to do about their payments once the pause was lifted. 'I think some saw the pause as a bit of extra cash, but others saw it as a lifeline — they didn't know how they were going to make the payments to begin with,' Tara Alderete of Money Management International told KUTV 2 News. One thing appears certain — student loan borrowers shouldn't expect any charity under President Donald Trump. Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says — and that 'anyone' can do it 'There will not be any mass loan forgiveness,' the ED said in its April news release. Borrowers may be subject to collection activities only after receiving 'sufficient notice' and opportunity to repay their loans, according to the ED. Borrowers who are in default may want to start making payments right away to limit any financial impacts. If you're not sure whether you are in default on your loans, you can check for more information on your loan status. Those who aren't able to budget for their student loans can explore repayment or consolidation options through the U.S. Department of Education. Beware of refinancing loans through private lenders or using credit cards, which can come with high interest rates and push you further into debt. If you're unsure how to move forward with reducing your debt, don't be afraid to seek help from a nonprofit agency. Expert advice can help you feel more in control of your budget and your finances. There are options and help available, even if you've been avoiding your student loan payments for years. 'It's going to be overwhelming, but we'll figure it out. We have to,' said Arnone. Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Robert Kiyosaki warns of a 'Greater Depression' coming to the US — with millions of Americans going poor. But he says these 2 'easy-money' assets will bring in 'great wealth'. How to get in now This tiny hot Costco item has skyrocketed 74% in price in under 2 years — but now the retail giant is restricting purchases. Here's how to buy the coveted asset in bulk Here are 5 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? Like what you read? Join 200,000+ readers and get the best of Moneywise straight to your inbox every week. This article provides information only and should not be construed as advice. It is provided without warranty of any kind. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
