New Credit Scoring Model Could Boost Consumers’ Scores

Has your credit been affected by late payments? Or are you trying to rebuild your credit after being unemployed for months? Well, I have good news for you. A new scoring system that could help you boost your credit score is now available. This new credit scoring model doesn’t factor in debts that went into collections that are now paid in full or negative credit history caused by a natural disaster.

VantageScore 3.0 is a new version of VantageScore, a credit scoring model created by the three main credit bureaus—Experian, Equifax and TransUnion. As of now, 7 out of 10 top financial institutions, including auto lenders, credit card issues and mortgage lenders, accept this score to evaluate consumers’ financial responsibility.

Experts predict that this score could become the new score for subprime lending, so pay attention to the most important things you need to know about VantageScore 3.0:

It doesn’t count debt collection accounts that are paid off: Unlike the traditional scoring systems, VantageScore 3.0 doesn’t track debt collection accounts that are paid off, as long as the balance is zero. A credit score by FICO would keep this information and use it in creating your credit score even though you had paid it in full. The VantageScore gives you the opportunity to clean all the negative information on your accounts and start fresh, which could greatly help you if you are trying to rebuild credit.

It protects you against natural disasters: The other advantage the VantageScore 3.0 offers is that if you have been a victim of a natural disaster, you can be protected against negative information on your accounts. This means that if you weren’t able to make payments on time and your accounts don’t show current, this information won’t harm your credit as long as you can prove you were a victim of a natural disaster.

It will benefit consumers with lack of credit history: With the VantageScore 3.0 millions of consumers who have little credit history will have a chance to qualify for a credit score. If you recently started building credit, this score can be extremely beneficial, as it may allow you to have access to loans and credit cards. However, always be aware of the interest rates that are offered to you when seeking any type of credit.

Adopting same credit scale as FICO: The new score is adopting the same score as FICO. The old version of this model used a different scale ranging from 501 to 990, which was different from FICO’s scale (300-850). This would often confuse people who were used to the FICO’s scale. With the adoption of a new scale, VantageScore 3.0 will make it easier for consumers and lenders to understand the meaning of credit scores.