VantageScore, the credit scoring model created by the three major credit bureaus, is rolling out a new version. The new version, dubbed VantageScore 3.0, is expected to boost the credit scores of many applicants, according to CNN Money.
What’s Changing with VantageScore?
The main changes to VantageScore include:
- Collections accounts: Instead of using collections accounts to negatively affect credit scores for up to seven years, accounts paid in full or settled (zero balance) will no longer drag down scores.
- Natural disasters: Right now, both good and bad credit behaviors are ignored in the credit scoring model in the wake of natural disasters like Hurricane Sandy. Now, though, reports CNN Money, VantageScore will ignore negative items, while rewarding positive behaviors in times of hardship.
- Rent and utility payments: Even though rent and utility payments aren’t credit items, VantageScore will now weigh these items in the case of consumers whose credit histories are limited. This way, on-time payments can be helpful to those who don’t currently have credit.
- New scoring range: VantageScore is also shifting its scoring range to match FICO’s scale, and abandoning its 501 to 990 scale.
These new changes could mean better VantageScores for those who are reasonably responsible, but who have suffered setbacks, or who don’t use credit very much.
Does It Really Matter?
Of course, as the CNN Money article points out, these changes to the VantageScore only help you if a lender is using the VantageScore to determine your creditworthiness. Most lenders still rely on the FICO score, which uses a slightly different model and algorithm than VantageScore. These changes to the VantageScore won’t affect your FICO score; if a lender uses FICO, you won’t see a benefit.
However, it appears that FICO is looking for ways to update its own model for those with limited credit histories, so some changes might be coming soon to your more “official” credit score.
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