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Pontiac, Mich. — February 25, 2020 — All eyes will be on credit scores as consumers speculate whether the changes being made to FICO score calculations this summer will have a negative impact on their updated numbers. According to Carma Peters, President and CEO of Michigan Legacy Credit Union (MLCU), the new FICO® 10 puts a greater emphasis on the debt trends of individuals—further enhancing the predictive capacity of earlier FICO releases in determining the likelihood of borrowers defaulting on their loans.
“Although many consumers worry that their new score will be lower than their current one, there is no need to panic about plummeting FICO scores yet,” Peters said. “Many individuals may actually see their number move up—if they’ve paid their bills on time and on a regular basis. It is high-spending individuals whose debt is trending upward that could see a dip in their credit score.”
Peters said there are steps consumers can take now, ahead of the FICO’s new credit scoring model, to ensure they’re in the best financial position possible. Following is Peters’ list of eight tried-and-true tips to attaining credit worthiness:
- Never charge more than half of your balance. Decreased credit capacity has the greatest impact on your credit score going down.
- Pay on time. It seems so obvious, but late payments are the second largest contributing factor for declining scores.
- Pull your credit report annually from each of the three credit bureaus—Experian, Equifax and Transunion—to verify that your information is correct.
- Make arrangements with your lender for any collection items, judgements, charge-offs, or anything else owed that you can’t pay off in a timely manner. When you avoid the negative issues and don’t contact your lender, your options decrease. Always stay in touch with your financial institution or lender; communication is key to receiving solution-oriented help.
- Provide a consumer statement on discrepancies—If there is a dispute that can’t be resolved, place a consumer statement on your credit report to let any lender or finance company know—and do so without asking. It shows you are paying attention to your credit and gives you a chance to tell your side of the story. Ask each credit reporting bureau how long the consumer statement will stay on your report and whether you can update it.
- Freeze your report in the event of identity theft—If you are a victim of identity theft or suspect something is off, freeze your credit report through all three credit bureaus—Experian, Equifax and Transunion.
- Don’t apply for a large amount of credit in a short amount of time—Opening up multiple credit cards over the span of a month, for example, can ding your credit score. An exception to the rule of not applying for a large amount of credit at once would be the purchase or lease of a vehicle. If you shop for a vehicle within a week or 10 days and apply for credit at multiple places during your car shopping experience, as far as your score is concerned the bureaus will not look at each individual inquiry. While the ding is not significant it could be the difference in a rate you receive on credit.
- Note that accurate information can’t be changed—Anyone reporting accurate information—including late payments—can NOT change it, as long as it is correct. If you have negative information that is accurate, it will move off your report after seven years.
Putting in a plug for her industry, Peters noted that credit unions, which are member-owned, may offer greater flexibility and use of non-traditional approaches to meet borrowers’ credit needs.
“With a member-ownership approach, credit unions are available to assist individuals by providing more information – or reassurance – when they are unsure about their credit report and pending FICO score changes,” Peters said. “We also have local decision-making authority, rather than relying on auto-generated, formulaic determinations of credit-worthiness, as is common among traditional banks.”
With six physical branches in Flat Rock, Garden City, Highland, Pontiac, Warren and Wyandotte, more than 20,000 members and $211 million in deposits, Michigan Legacy Credit Union recently announced a new strategic direction for its branch network that includes updated but smaller branches, including some in new locations, a new design theme, and the introduction of video teller platforms. The new prototype branch will debut in the fall of 2020 in Flat Rock, near MLCU’s existing Flat Rock branch, which will be sold. All MLCU branches welcome pets.
About Michigan Legacy Credit Union
Michigan Legacy Credit Union (MLCU) is a member-owned, not-for-profit financial cooperative serving members who live, work, worship, attend school, or own a business in the state of Michigan. Michigan Legacy Credit Union is committed to providing quality financial services at a competitive price, delivered professionally and efficiently while keeping member/owners and their needs first. For additional information on MLCU, visit: www.michiganlegacycu.org.