PHOENIX — It happens about every five years -- The Fair Isaac Corporation, or FICO, updates the way they calculate your credit score.
It's used by about 90 of the top 100 lending companies in the United States, deciding if they will loan you the money for a new car or even a home.
"The new scoring system looks toward consumer behavior and that could potentially have a negative impact on consumers who are really struggling to get by when it comes to debt payment," said Sara Rathner, a credit card expert with Nerdwallet.
For the first time, FICO is taking a deeper look at personal loans and if people are using them to pay off credit card debt. Under the old model, this may have caused your score to go up. However, now it could be a negative.
The same goes for failing to make credit card payments on time.
"These are all types of things that, you know, could potentially bring a credit score down in general," said Rathner. "But then with the new scoring model, it could potentially bring that score down further."
However, the truth is, you don't know if your lender will be using the updated model.
"Lenders use old scoring models all the time," said Rathner.
She says mortgage lenders sometimes use a version of the FICO from 10 years ago!
"Really the only thing that consumers have control over, when it comes to their credit score, is their own actions and behavior," said Rathner.
So, whatever calculation is used...
- Pay your debt payments on time - even if it's just the minimum payment.
- Lower your debt ratio by paying down larger balances.
- Keep credit cards that are in good standing open.
To see how different actions could potentially impact your credit card school, Nerdwallet has a credit simulation tool you can find HERE.