A History of Payments: How Much Does Starting Over Ding Your FICO?
For most adults who are out of school, there's only one "grade" left that really matters in your life: Your credit score. A good one can save you hundreds of thousands of dollars over the course of your lifetime, and a poor one prevent you from living the life you want to.
In this clipfrom Motley Fool Answers, Alison Southwick, Robert Brokamp and Fool alumna Dayana Yochim take on an unusual question about the "length of credit history" component of your score: Should people be concerned about the impact of switching away from a longtime service provider or utility like a cellphone company?
A full transcript follows the video.
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This podcast was recorded on July 12, 2016.
Alison Southwick: The next question comes to us from Jared. Jared writes: "My longest line of credit seems to be my cellphone. In evaluating how much I can save switching to a different provider, it struck me that I would adversely impact my credit score to some degree. Can you advise how to calculate the impact of a lower score? I suspect I will be moving; thus buying a house in the next two years."
Dayana Yochim: That's a great question. MyFICO.com has a credit score simulator on its site, and you can tinker with the numbers there just to see. Saving money -- probably you could save significant money by switching, I'm assuming, if he's asking the question -- is probably more important at this point than what it's going to do to your credit score, because whatever it does, you're buying a house in two years. It will recover before then.
Also, this is not really a traditional line of credit that's reported on a typical credit report. This is a utility bill that's sometimes not reported. They are not required to report. There are other databases where this definitely is showing up, but those probably matter a little bit less. A good question about the length of credit history. I think here go ahead and make the change, and you've got time to recover, even if it's a slight ding. And by the way, hopefully it's an account in good standing. This is going to be on your record for quite some time.
Robert Brokamp: And definitely very smart to be thinking about this before getting a mortgage. It gives you time to get your report, fix anything that's wrong, and also do a few things to boost your score.
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