Many consumers across the country are aware of the significant role that a healthy credit score can play in a large number of aspects of their lives, but one of the nation’s foremost credit scoring firms recently changed the way in which it evaluates borrowers.
VantageScore’s new credit scoring system is designed to help borrowers get and maintain the best ratings possible. One of the most obvious changes to the ways in which VantageScore has changed is that it no longer runs from a low of 501 to a high of 900, but rather now adheres to the existing standard set by FICO, the company that pioneered credit scoring, by running from 350 to 800. This allows for uniformity across a larger number of types of credit scoring, and therefore makes it easier for consumers to know exactly where they stand, and how much work they may have to do to get their standing up to snuff.
Ways in which the new system helps borrowers
Perhaps the most notable change for millions of consumers across the country with no borrowing histories is that the new VantageScore system allows them to have a credit score they did not have before. As a result of this change, there is the potential for between 27 million and 30 million consumers across the country to have a credit standing, which in turn could help them to obtain their first loan or credit card to which they may not have had prior access.
One of the ways in which it does this is by using payments made regularly into non-credit bills, including rent, utilities, and even cellphone or cable television service, to determine how trustworthy they are. Further, it will take into account credit data for borrowers who have not used their accounts in more than two years. Moreover, for borrowers who do not have any active credit data upon which lenders can draw to determine their eligibility for accounts, the new model considers more factors — such as debt in collections, public inquiries and other information — to create predictive standards through which lenders can make more informed decisions. The scoring system also takes into account more specific data related to the types of credit consumers carry, such as differentiating between standard non-revolving debts and student loans, and keeping better tabs on delinquency and default to gain a clearer picture of a borrower’s payment habits.
Moreover, because this new score has the ability to look into debts sent to collections, those balances that went through such a move but were then handled properly by the borrower in question — through whatever repayment method was accepted by the debt recovery agency — and paid off in full, will no longer count against the consumer. That, in turn, will allow them to more quickly raise their scores again and get their finances back in order.
In addition, consumers who have missed deadlines, taken on significant debt, or made other traditional credit missteps through no fault of their own following a major natural disaster will no longer see these financial moves count against them. In much the same way that many banks will now waive late fees and other penalties for borrowers affected by these incidents, VantageScore won’t debit credit score points for such victims. However, those who work hard to maintain their standing in the wake of these events will have that positive activity continue to build their score; only negative situations will not be considered.
Finally, the company has set up a separate website designed to help consumers who are declined for a line of credit for which they have applied understand the reasoning for the lender rejecting their application. These are communicated with what are known as “Reason Codes,” and the VantageScore site explains what each means in plain language that makes it easier for borrowers to understand the type of work they have to do to get back to a more acceptable standing in that lender’s eyes.
Checking credit reports is also important
Credit scores are still mostly culled from the data listed on a person’s credit report, and as such it is vitally important for borrowers to regularly check these documents to see exactly what is listed on them. In some cases, there may be unfair markings on these documents that can take a sometimes significant toll on borrowers’ standings and consequently make them ineligible for lines of credit to which they should otherwise be entitled.
If any such markings are discovered on these documents, it can behoove borrowers to contact a credit repair company about the situation. This may allow them to more easily deal with the problematic entries and return their credit standings to where they deserve to be.
