Today VantageScore Solutions announced the release of the 3rd generation of their credit bureau based risk scoring model, the VantageScore Score. Experian, one of the three credit reporting agencies that sells the VantageScore score has already announced that the scoring model is available for sale to lenders. There are several new and interesting changes to this new scoring model built by FICO’s primary competitor. The most interesting changes, in my mind, are…
New scaling – VantageScore 3.0 is now scaled 300 to 850, which is the exact scaling of FICO’s credit scores. VantageScore’s prior scale was 501 to 990. We can all speculate why they’ve done this but it is true that we’ve all grown up knowing nothing other than a 300-850 credit score range as being standard. So, the move to rescale their model does make sense. And, it’s not the first time we’ve seen a VantageScore score using a 300-850 score range. Experian and Wells Fargo have a free score giveaway program right now (and had one last year as well) and the score that’s being given away is a customized version of the prior rendition of VantageScore and it’s scaled at 300-850.
Ignoring Paid Collections – The new score does something no other credit bureau score does – ignores all collections that have a $0 balance. FICO’s “FICO 8″ model ignores collections that have an original balance less than $100. This new change should make consumers with paid or settled collections very happy and collection agencies even happier. The bypassing of $0 balance collections should act as an incentive to pay or settle your collection accounts.
More Consumers Scoreable – Not all credit reports qualify for a score. However, VantageScore is suggesting that their new model can score 27-30 million consumers whose credit reports didn’t qualify for a score under the prior version, which is larger number than the population of Texas. This is good news for unbanked consumers who have limited credit histories and find themselves having to use 2nd tier financial services, such as prepaid debit cards and payday lenders.
Natural Disaster Score Protection – Banks and other lenders have the ability to show that an account belongs to a consumer who has been displaced or otherwise impacted by a natural disaster, like Hurricane Sandy. The new score will not allow derogatory accounts that are identified as being the result of a natural disaster to have any negative impact on their VantageScore.
I’ll let VantageScore have the spotlight today. Tomorrow I’ll post excerpts from their press release, which contains more detail about the new score and its features.
Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, founder of www.creditexpertwitness.com and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. You can follow John on Twitter here.