Credit Card Payments May Take on New Role in Credit Scores
The country’s three biggest credit bureaus may eventually change the way they calculate credit scores. The new system could be designed to give “transactors” better scores than “revolvers” for their credit card payments because those individuals have proven themselves to be more creditworthy.
A transactor is a person who pays off his or her credit card debt in full every month. Transactors do not carry a balance from one month to the next. Therefore, they do no incur any interest penalties or pose much risk of defaulting.
A revolver, on the other hand, is someone who maintains a level of credit card debt every month, either by only making minimum payments or not making payments that are high enough to cover the full balance.
If this does take place, it could result in a change in the credit card industry. Consumers might be more likely to pay off their card balances if they know their credit scores could be affected by revolving their debt. Credit card companies could then see a decline in profits because consumers are not incurring as much in interest charges.
There are multiple credit bureaus in the world, far more than what most people realize. Thus, changes like this may not have an impact on credit scores across the board. Nevertheless, Equifax, Experian and TransUnion could make adjustments in their scoring algorithms in the near future. You might want to start changing your spending strategies now to take advantage of these possible new rules.