A new credit scoring model – VantageScore 3.0 has been introduced recently. It has been framed after completely overhauling the earlier VantageScore system. The original VantageScore system has been in practice since 2006. Three major credit rating agencies – Experian, Equifax and TransUnion – were responsible for the establishment of the original version of VantageScore. Anyways, this new system is an update of the old version. The new scoring model will help countless borrowers with no credit history at all to establish their credit. Here we discuss about the changes that took place in regard to the scoring model.
Countless consumers will qualify for credit score
With the new VantageScore 3.0 system, nearly 30 million consumers will qualify for credit score. These consumers are not eligible for conventional FICO score, due to lack of credit history. The new model will look back up to 2 years so as to track credit activities of the consumers. The new model looks into the credit activity of the people whose last credit transaction is less than 6 months old. This is likely to open up the lending market for countless un-banked or under-banked borrowers in the country.
It won't take debt collection accounts into account which is paid in full
Under the new scoring system, debt collection accounts which have already been paid in full, would not be taken into consideration while determining credit score. Despite the fact that you defaulted on several times, once a debt is repaid in full, it would no way have any negative or positive effects on your score. This is really a boon to the borrowers. Under the FICO scoring pattern and the original version of the VantageScore, any delinquency or untimely payments on debts has had negative effects of the credit score. This is really a boon to those consumers who are on the way to rebuild their credit score after a credit slump.
It is built on same score range as FICO
The original version of the VantageScore used the scoring range of 501 to 990. On the other hand, FICO score employs a scoring range of 300 to 850. This difference in scaling system creates problems in score comparison. The new Vantage scoring system has done away with the earlier scaling system and it has adopted the same scoring range as followed by the conventional FICO scoring system. This is likely to make the two scoring system more comparable.
Negative history caused due to natural disasters won't be counted
The recent Hurricane Sandy severely damaged many borrowers. In order to offer some relief to the aggrieved borrowers, lenders offered temporary breaks on fees for a certain period of time. It seems that the new scoring system has taken out a leaf from their book. Any negative item in the accounts resulted due to natural disasters, will not hurt the credit score of a consumer in VantageScore 3.0 system.
These are some good changes in the original VantageScore system. This is likely to help numerous consumers build credit history which is not possible otherwise.