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Bankruptcy May Be Your Option

Many Oklahoma residents will soon see an increase in credit score

Most Oklahoma residents have never heard of Fair Isaac Corp., and that is something that needs to change; since it is an organization that can have a huge impact on the life of anyone who needs to borrow money.

Fair Isaac Corp., also known as FICO, is where your credit score comes from. Your credit score is a three digit number between 300 and 850 that can significantly affect your ability to buy a home, buy a car, get a credit card, and buy insurance.

Your credit score is calculated by FICO using several factors, and it is meant to be an indication of whether you are an acceptable risk to lenders. The lower your credit score, the more it will cost you to borrow money to make important purchases, if you can even borrow money at all. In short, for those with low credit scores, it costs much more to borrow money.

For example, a borrower with a credit score between 720 and 850 will pay 4.087% interest on a 30 year mortgage, while a borrower with a credit score between 620 and 674 will pay 5.899% interest on the same loan.

So the recent announcement by FICO that is revamping the way credit scores are calculated is great news for many borrowers, including those who are trying to rebuild their credit after suffering financial challenges. The announced changes to the calculation involve not including information on collection accounts that have been settled or paid off, and not counting medical bills that are in collection as harshly.

As we discussed in our last post, one-third of Americans are currently subject to debt collection efforts. An automatic increase in one’s credit score is may be beneficial, but many are still struggling from month-to-month to pay their debts while maintaining a roof over their heads and putting food on the table.

For those who continue to struggle, obtaining a fresh start through bankruptcy or other method of debt relief may be a viable option. Seeking the advice of an attorney who can advise you of your options may be a good first step.

Source: NPR, “Shazam! Now you look like a better borrower,” Marilyn Geewax, Aug. 8, 2014

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