How the Newest Scoring Model Could Impact Your Credit Score

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Perhaps you’ve never heard of VantageScore, but this credit scoring model is about to get revamped — and your score could be affected.

VantageScore Solutions, the company behind the VantageScore credit scores, announced this week that its new VantageScore 4.0 credit scoring model will become available to lenders this fall.

VantageScore Solutions launched in 2006. The company and its VantageScore credit scores compete with Fair Isaac Corp., or FICO, and its more established FICO Scores. To learn more about the differences between your VantageScore and FICO credit scores, check out “Heads Up, FICO: You’ve Got Company.”

VantageScore Solutions’ current credit-scoring model, introduced in 2013, is known as VantageScore 3.0. VantageScore 4.0 will build on it through three key changes.

First, VantageScore Solutions says the 4.0 model will be the first credit scoring model used by the three national credit reporting agencies — Equifax, Experian and TransUnion — that is designed with the National Consumer Assistance Plan in mind. The NCAP is an initiative of the three national credit reporting agencies (CRAs) that will take effect July 1.

As we recently reported in “2 Types of Black Marks Might Vanish From Your Credit File Soon,” this means the three agencies plan to stop collecting and reporting a lot of information about civil judgments and tax liens in consumers’ credit files.

With these impending changes in mind, VantageScore Solutions says the 4.0 model:

  • “Distinguishes medical collections from other types of collection accounts, ignores medical collections less than six months old (to allow time for insurance-payment processing) and penalizes medical collections less than non-medical ones.”
  • “Relies less on derogatory collections and public-records data to ensure that the model will not lose substantial predictive strength in the likely event that these records fail to meet enhanced data quality standards and are removed from consumer credit files under provisions of the NCAP program.”

Second, VantageScore 4.0 will also be the first credit scoring model used by the three national CRAs that will include what’s known as “trended credit data,” according to VantageScore Solutions.

As Credit.com explains it, this means the 4.0 model “looks at a consumer’s credit behavior over time … For example, the score takes into account how a consumer’s credit balance has changed over a period of months, rather than taking a single snapshot in time.”

The third key change for VantageScore 4.0 is its use of data mining to create scorecards for consumers with sparse credit histories.

In other words, Credit.com explains, the model “used large data-processing platforms to examine thousands and thousands of combinations of consumer behaviors to identify which ones were associated with people paying their bills on time.”

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