Synopsis: Credit Industry Changes Workshop

[David Dachtera]

This is a brief synopsis of today's Credit Industry Changes Workshop ...

The changes in the credit industry discussed at the workshop today went into effect on June 1st - my mistake: I thought they were coming on July 1st.

The bulk of it focuses on a new way in way in which creditors and lenders can look at your credit history.

Up until now, your credit report has been only a "snapshot" in time: what was in the credit bureau databases at the time the data were pulled. Nothing historical other than your payment history per account.

Now, there is an option for the prospective creditor / lender to examine as much as two years of your credit history. They'll be able to track your balances, payments, usage and limits going back up to two years.

This will mostly be encountered in home loan lending and may find it's way into credit card lending as well.

This is a recent change and the level of usage and acceptance in the market will change over time.

This much is clear: the days are gone when you could pay down your personal credit accounts (revolving credit) to improve your scores temporarily and lower your revolving credit utilization temporarily in order get a new home loan or HELOC, for example, or possibly a new auto loan. Lenders now have visibility into how you've been managing your credit for the past two years.

This new method of credit report analysis favors those who have revolving credit and prefer to pay off balances every month (known as "transactors") and have a pay-OFF history, but little or no payMENT history. Past models tended to favor those who carry a balance and have a history of timely payments.

This also means that now the content of your credit report is more meaningful than any score you may think you have. Credit scoring will be fading out as the new credit analysis model gains acceptance.

David J Dachtera