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Your credit score has long been determined by a standard measurement known as FICO. Your score is determined using the information in your credit report, such as your payment history and how much debt you owe, and creditors and lenders, along with insurance firms and landlords, use your score to determine your credit-worthiness. The lower your score, the higher interest rates you will pay on your loans and credit cards, if you are approved for them at all.

Starting in 2019, however, a new opt-in credit score system, UltraFICO, is being implemented and consumers could see a boost to their credit scores.

Here are the important differences you should know: the original FICO score takes into account debt levels, new credit, payment history, length of credit history, credit mix, and several other factors.  UltraFICO will also focus on cash behaviors, such as how much you keep in your checking, savings, and money market accounts, and how you use this money; how long you have maintained a bank account; and whether you’ve had negative balances.

The new scoring system may be most beneficial to those consumers with low credit scores or young people with little credit history. Because it is an opt-in program, consumers are being asked to sign-up to participate in the early stages: https://www.fico.com/ultrafico/

If you have a low credit score or little credit history, there are ways for you to build better credit before opting into this program:

Make all payments on time.  Payment history is the number one factor in your credit score.

Review your credit reports for accuracy.  You can get negative items removed from your credit report if they are inaccurate or incomplete.  Send a certified letter to all three credit reporting agencies and tell them that the items are inaccurate or incomplete and that you want them removed.

Stop using your credit cards.  To avoid temptation, cut them up.  Keep one card available for emergencies.

Keep low balances on your credit cards. 

Think before closing accounts.  Closing one to two accounts in a six month period will negatively affect your credit score.

Contact your Creditors if you are having difficulty making payments.  Most creditors will work with you to develop a payment that fits your budget.  If you negotiate lower payments, lower interest rates, or balance payoffs, get it in writing.

Consider a debt consolidation loan.  This allows you to pay off your outstanding balance with one, lower-interest monthly payment.

Avoid credit repair scams.  These scams target people with bad credit or no credit with the promise of a quick fix.  Only time and effort will repair your credit report.

Know where your money goes.  Poor money management and high debt often contribute to a bad credit rating.  To get your finances under control you should consider the following.

  • Track your expenses for one month. Save receipts and record whatever money you spend.
  • Once you know where your money is going, you can make changes to your spending habits.
  • Create a budget and stick to it. This will help you to plan out expenses and avoid overcharging.

The Federal Trade Commission publishes a booklet to help explain how to build a better credit report.  For more information, go to Build a Better Credit Report or visit our website at www.mass.gov/comsumer.

 

If you have additional questions, contact the Office of Consumer Affairs and Business Regulation by calling our Consumer Hotline at (617) 973-8787, or toll-free in MA at (888) 283-3757, Monday through Friday, from 9 am-4:30 pm. Follow the Office on Facebook and Twitter, @Mass_Consumer. The Baker-Polito Administration’s Office of Consumer Affairs and Business Regulation along with its five agencies work together to achieve two goals: to protect and empower consumers through advocacy and education, and to ensure a fair playing field for Massachusetts businesses. The Office also oversees the state’s vehicular and customized wheelchair Lemon Laws and Arbitration Programs, Data Breach reporting, Home Improvement Contractor Programs and the MA Do Not Call Registry.

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