Three Changes to the Latest VantageScore That May Help You

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When you think of your credit score, you most likely think about your FICO (Fair Isaac Corporation) score, but that’s not the only calculation out there. VantageScore is another big player in the credit score game. VantageScore Solutions just announced the release of their fourth-generation score, and it’s a game changer for many consumers.
Credit Karma and other services use VantageScore, and it’s a growing competitor for FICO that many lenders and creditors are increasingly using. If you’re applying for credit and have some negative items, you might get a better outcome from a lender or creditor that uses VantageScore 4.0 than a FICO calculation product. Here’s why.

#1 VantageScore 4 Puts Less Weight on Medical Collections

Medical debt can knock a considerable amount of points off your credit score. If you have medical debt collections on your credit report, it can hurt you even if it’s a bill owed by your insurance company but they’re dragging their feet on paying. Medical debt collectors don’t care if it’s your insurer’s responsibility and if it’s legitimate debt, it can hurt your score.

The new VantageScore doesn’t take into account medical debt that are 180 days and less since those can reasonably attributed to insurer delay. Some other negative items including some public records, will also weigh less on your score under VantageScore 4.0. This means that some tax liens and civil debts may not hit you as hard if your creditor is using this calculation instead of FICO.

#2 Artificial Intelligence Can Help Those with Little Credit

If you don’t have a lot of credit, you have what’s known as a “thin file.” This can happen for young people just getting into their first jobs and first credit. It can also help those who are restarting with their credit after bankruptcy or an extended period of credit inactivity. It sounds strange that AI (artificial intelligence) would play into this but it’s not sci-fi, it’s a tangible application.

VantageScore’s new AI modeling can offer a significant lift to thin files. This is a new arena for AI and credit scores and this new model may or may not take hold with creditors. A VantageScore Solutions rep says that using AI and “the most recent, cutting-edge model development and data techniques available” can expand borrower opportunities.

#3 Today’s Data vs. Trending Data

The FICO score is largely based on static data meaning it’s data from right now, a week ago, or a month ago. One example is credit utilization, which looks at the amount of credit card debt you have versus your total credit lines. If you pay for a car repair just before your credit card statement closes, you could have a high utilization and your score drops.

Then, a couple of weeks later, when you pay off your debt in full, your utilization is smaller and your credit score rebounds. You did nothing wrong, yet your score dropped, then raised. Trending data used in the latest Vantage Score looks at your credit habits over time rather than in just one moment, one week or one month. This helps creditors better assess your risk.

How to Benefit from the New VantageScore

Although it’s sometimes slow for lenders and creditors to adopt new credit score models, it’s still best to be aware how to take advantage of this new calculation when it does come online and begins adoption later in 2017.

Pay Your Credit Cards in Full

Because trending data better differentiates between those that occasionally have higher utilization and those that have occasional higher balances, you should try and pay off your cards in full every month. Those that carry balances are more likely to default according to these models, so paying off will give you a higher score predictably.

Stay on Top of Medical Bills

Because this new model only looks at medical bills older than six months, it’s imperative that you follow up aggressively with your insurance company to ensure they issue timely payments to your medical providers. Don’t sit back and hope they do right. Call and bother them until they pay so your credit score doesn’t take a hit.

If you’re just finishing up bankruptcy or have had your discharge for a few months, it’s time to get serious about improving your credit. Contact Credit Score Keys to find out more about rebuilding credit after bankruptcy.