This fall credit scores across the country may rise. There are four new changes to the VantageScore (a new thing created by the big 3 credit bureaus) that may increase credit scores for those that need it most. Unfortunately for those looking to buy a home the FICO scoring model will not be effected.
KETV says, “The new method is being implemented later this year by VantageScore, a company created by the credit bureaus Experian, TransUnion and Equifax. It’s not as well-known as Fair Isaac Corp., whose FICO score is used for the vast majority of mortgages. But VantageScore handled 8 billion account applications last year, so if you applied for a credit card, that score was likely used to approve or deny you.”
The changes include:
Trended data – CNBC says, “Using what’s known as trended data is the biggest change. The phrase means credit scores will take into account the trajectory of a borrower’s debts on a month-to-month basis. So a person who is paying down debt is now likely to be scored better than a person who is making minimum monthly payments but has been slowly accumulating credit card debt.”
Legal data – Civil judgments, medical debt and tax liens will no longer affect your score. Mortgages are still primarily using FICO scores so don’t get too excited but for other types of loans (credit cards, auto loans, etc.) this could really help some folks out.
High Limits – the debt ratio portion of scoring for VantageScore is about to be turned on it’s head. Instead of the lower the debt ration, the better people with “excessive” credit card limits could be hurt. the rational is that those with higher limits could rack up more debt, faster.
Less Robust History – According to the Motley Fool those that have fewer items on their credit histories may also see an increase in their score due to, “The model will examine thousands of various consumer behaviors in an effort to identify those who have a propensity to pay their bills on time, because these are the people that lenders want to attract.”
Some changes may help and some may hurt depending on what’s going on with your credit scores right now. Motley Fool gives the easiest explanation of the biggest changes. Read more here.
Shay Olivarria is the most dynamic financial education speaker working today. Previous clients include: the Yorba Linda Water District, Verizon, and Friends of Allensworth, among others. She has written three books on personal finance, including Amazon Best Seller “Money Matters: The Get It Done in 1 Minute Workbook”. Shay has been quoted on Bankrate.com, FoxBusiness.com, NBC Latino and The Credit Union Times.The 2nd edition of “10 Things College Students Need to Know About Money” is available now.