Credit scoring can seem overwhelming. But it doesn’t have to be. Knowing which five categories are used to calculate your credit score can make understanding it much easier. This information can also give you insight into how to sustain your score if it’s in the “healthy” range—or how to take simple steps to strengthen it.
It’s also possible that homebuyers may soon see their credit score improve. Equifax®, Experian®, and TransUnion®—the three credit reporting agencies in the U.S.—recently announced changes to how medical collections debt will be reported. Why the changes? Medical collections debt isn’t viewed to be a reliable indicator of credit behavior.
After July 1, 2022, paid medical collections debt will drop from credit reports, and the time frame in which unpaid medical collections appears will increase from six months to one year. Medical collections under $500 also won’t appear on credit reports after 2022; this reflects most of the medical collections reported. Overall, nearly 70 percent of medical collections debt may be removed.
This joint action is intended to offer consumers more time to pay down medical debt and, ideally, keep it from appearing on a credit report altogether. The change is expected to help millions carrying a total of $88 billion in medical debt, with positive effects extending to homebuyers too. You can request a free weekly credit report here through the end of the year or contact your Loan Officer to learn how these changes may benefit you.
Homebuyers, especially first-time homebuyers, often wonder about how their credit score affects the homebuying process. If this rings true, it can help to review some of the basics:
- Your credit score is a three-digit number on a scale of 300 to 850.
- Generally, scores that are 700 or above are considered good, and scores between 750 to 800 are considered excellent.
- Scores of 550 to 580 or below are considered very poor, but there are strategies to bring your score up.
- Your credit score (a three-digit number) is different from your credit report, which details what factors went into the equation that resulted in your score.