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Credit scores take on a new look

The standard for obtaining a credit score has been based on the FICO credit scoring model for decades, but that is going to be changing soon. In fact, some lenders are already using the new Vantage scoring model, which will benefit some buyers and hurt others.

While there are many similarities in the two models there are some striking differences. Paying your bills on time, keeping your balances low and paying off credit card debt will still be important, but paid collections, tax liens, civil judgements and medical collections may be viewed more leniently.

It should be pointed out that while the credit score may not be as adversely affected by liens or judgments, it does not mean that they will not affect your ability to be granted credit. With the new model more emphasis will be placed on timely mortgage payments and paying larger payments on revolving credit while penalizing those that only make the minimum monthly payment.

Under the current FICO scoring model, potential buyers can shop for rates or loan programs with a variety of lenders within a 45-day window and not have it hurt their score, but the newer model will allow only a 15-day window.

Another change on the horizon will adversely affect those with high credit limits on their credit cards, even if they are not accessing the credit, with the thinking that they could access that higher credit at any time. This also applies to those with several open lines of credit, made popular by the many perks that are offered by the credit card companies. So contrary to previous thought about keeping credit cards open, it will likely improve your score by closing unused credit cards to reduce your total credit limit.

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