Will credit card payments have a new role in credit scores?

Tuesday, July 15th, 2014

Today most consumers understand how to avoid their credit cards having a negative effect on their credit scores. They know that making every minimum payment every month on time, keeping balances below 30% of the card’s credit limits, and applying for new credit cards only when they need them will help them achieve a good or a great credit score.

But now a new factor might soon affect your credit score. Experts suggest that credit bureaus may start taking into consideration the amount by which you pay down your cards each month. One of the credit bureaus is already using this amount to calculate your score. Other bureaus and scoring companies may start doing this as well.

The aim of this is to differentiate between “revolvers” (carry balances from month to month) and “transactors” (pay down their balances in full each month). The theory is that transactors are likely to be more credit worthy. Therefore, they deserve higher credit scores.

If the credit bureaus do in future begin to differentiate between transactors and revolvers, it could end up credit scores being downgraded even if a consumer always make minimum or higher credit card payments on time every month. That could significantly change the consumers’ view of a plastic.

This could be bad news for credit card companies as well. It could result in fewer revolvers and companies might lose money.

Using your status as a transactor or revolver to help calculate your credit score may be just a beginning. In the future we might see all sorts of new factors affecting our creditworthiness. But for now, the factors that create a good credit score remain the same.

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