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VantageScore, the credit scoring model produced by the three major credit bureaus, is rolling out a brand-new version. The brand-new variation, called VantageScore 3.0, is expected to increase the credit ratings of many candidates, according to CNN Money.
What’s Changing with VantageScore?
The primary modifications to VantageScore consist of:
- Collections accounts: Rather of utilizing collections accounts to detrimentally affect credit scores for up until seven years, accounts paid in full or settled (zero balance) won’t drag down scores.
- Natural disasters: Right now, both good and bad credit habits are overlooked in the credit scoring model in the wake of natural disasters like Typhoon Sandy. Now, though, reports CNN Money, VantageScore will disregard negative items, while satisfying positive habits in times of difficulty.
- Rent and utility payments: Although rent and energy repayments are not credit items, VantageScore will now evaluate these products in the case of consumers whose credit histories are restricted. In this manner, on-time repayments can be helpful to those who do not currently have credit.
- New scoring range: VantageScore is also shifting its scoring variety to match FICO’s scale, and abandoning its 501 to 990 scale.
These new changes could possibly indicate better VantageScores for those who’re sensibly accountable, however who’ve suffered problems, or who don’t make use of credit significantly.
Does It Really Matter?
Of course, as the CNN Money post mentions, these changes to the VantageScore only assist you if a lending institution is using the VantageScore to identify your creditworthiness. A lot of lenders still count on the FICO rating, which uses a somewhat various model and algorithm than VantageScore. These modifications to the VantageScore will not affect your FICO score, if a lending institution utilizes FICO, you will not see a perk.
However, it appears that FICO is searching for ways to update its own model for those with restricted credit histories, so some modifications may be coming quickly to your even more “main” credit rating.