Why Using an Alternative Credit Score is More Important Than Ever

Maintaining an excellent credit score is hard work, but it’s about to get more challenging. In January 2020, the financial website MarketWatch.com announced that the Fair Isaac Corporation, the developers of the FICO score that can determine everything from how much interest you pay on a car loan to whether you can rent an apartment, plans to make significant changes to its scoring model.

Consumers who fall behind on even one loan and those with increasing levels of debt could soon see their credit score dip. Fair Isaac also plans to highlight specific consumers to lenders who have one or more unsecured loans on their credit report.

Scoring Model Changes Increase the Divide Between Consumers

Lenders naturally want to know which applicants present a high risk and avoid borrowing money to them. However, those who have struggled in the past or don’t have much credit to begin with may find themselves ranked even lower than people who have never had a serious financial issue.

In the credit world’s version of the rich get richer, consumers who already have higher credit scores will likely see them go up even more. After Fair Isaac implements the changes, having a moderate to low credit score while continuing to struggle to make timely payments will drop the FICO score more than it would today.

Unsecured Personal Loans See Triple-Digit Increase in Five Years

Since 2015, the number of Americans taking out personal loans not secured by collateral has jumped 142 percent. Because these loans typically offer a lower interest rate than credit cards, a record number of people have used them to pay off their credit cards.

Unfortunately, some consumers continue to use the credit card and then end up with more debt than they can repay in a timely manner. This is one reason for the Fair Isaac emphasis on consumers with unsecured personal loans. The credit score giant also intends to make it possible for lenders to see a 24-month aggregate history of an applicant for a more accurate picture of his or her financial health.

Upcoming Changes Not Consumer-Friendly

While past FICO changes such as the removal of judgments and other public records from credit reports benefited consumers, the upcoming changes are more to the benefit of lenders. This represents a big change that has some consumers wishing for the option of an alternative credit score more than ever. PRBC has responded to this demand by creating free alternative credit scores for consumers based on the bills they currently pay. This includes items not found on Transunion, Equifax, and Experian credit reports such as utility bills, cell phone bills, and rent.

You Always Have an Alternative

It can get discouraging when you’re trying your best to be financially responsible, but lenders still won’t give you a chance. PRBC understands this, which is why we invented the alternative credit score in the first place. We invite you to contact us to learn more or complete this short application to sign up for your free alternative credit score today.