Buzz
Our credit scoring system has plenty of flaws, but the silver lining is that steps are being taken to improve it. This fall, we’ll witness significant shifts in how credit scores are calculated.
That’s right: you don’t have just a single credit score. You actually have several, and while the FICO score generally holds the most weight, many lenders, utility companies, and other services also rely on a score known as the VantageScore.
Earlier this month, VantageScore Solutions, the company behind VantageScore, introduced some updates that will impact consumers.
First, the new model will analyze your credit over time using trended data. Rather than evaluating your credit based on a single moment, the updated score will track how your credit behavior has evolved. It will assess whether you’ve been actively paying down your debt or accumulating more. While this might not favor all consumers, it’s a positive change for those who are making efforts to reduce their debt.
A representative from VantageScore Solutions told The Washington Post that this update aims to tackle a complicated credit issue:
The changes also address a concern that affects individuals with generally strong credit scores who might temporarily carry more debt due to a large purchase. For example, someone could see their score dip after booking an expensive flight, even if they plan to pay it off in full and on time, says Richardson. However, the new model would recognize the individual's history of maintaining low credit balances, so their score wouldn't be as negatively impacted.
The new model will also omit certain public records, such as liens and judgments.
These changes aren’t a perfect fix, and many lenders still don’t use VantageScore. As The Washington Post notes, most mortgage lenders rely on your FICO score. Still, many other institutions—like credit card companies, auto loan lenders, and apartment complexes—do use VantageScore, making this an important step forward.
