Even though most Ohio lenders still use a version of the FICO score, the VantageScore has slowly gained popularity in the last few years. The VantageScore was developed by the three major credit bureaus; TransUnion, Equifax, and Experian to compete with the FICO score. Currently, VantageScore 3.0 is available, and VantageScore 4.0 is complete and ready for release. In fact, the company reports that this new version of the credit scoring model will roll out in the fall of 2017. Honestly, the introduction of VantageScore 4.0 won’t mean much for Ohio consumers, especially not at first. Lenders are notoriously slow when it comes to adopting new credit scoring models. However, it is good to know a little about what makes the VantageScore 4.0 different from its predecessor and major competitor.
VantageScore 4.0 Wants to Make More Ohio Consumers “Scorable”
Ohio consumers with “thin credit files” or limited credit history my eventually benefit from VantageScore 4.0. Actually, one of the primary goals in the new scoring model’s development was to broaden the “scorable” consumer base. With the most widely used versions of the FICO score, a credit score is only possible for consumers with a credit account that is at least six months old.
Several mortgage and consumer advocacy groups don’t think this is fair. In fact, both Freddie Mac and Fannie Mae are under pressure to adopt a new credit scoring model. Those who oppose the traditional FICO model believe that new standards will make more homebuyers eligible for mortgage approval. So, both FICO and VantageScore have worked to come up with alternate systems.
FICO developed the FICO XD credit score which draws on alternative scoring data. This data includes such factors as utility bill and cell phone payments. However, the FICO XD score is viewed as a kind of “credit score in training.” It only serves as an Ohio consumer’s credit score until the acquisition of a loan or credit line makes a traditional FICO score possible.
The VantageScore 4.0, on the other hand, utilizes machine learning to bring in Ohio consumers with thin credit files. This type of artificial intelligence takes any available data and predicts future credit management behavior. Ideally, this will allow the use of only one credit score that adapts as the consumer increases credit use over time. Of course, it is too soon to tell whether or not lenders will trust predicted outcomes as much as solid credit histories.
Two Additional VantageScore 4.0 Innovations that May Affect Ohio Consumers
There are two other changes to the credit scoring model that the creators of VantageScore 4.0 tout as innovative.
1 – Less emphasis is placed on medical debt collections, tax liens, and civil judgments.
With the VantageScore 4.0 credit score, Ohio consumers with these kinds of derogatory marks on their credit reports may notice better ratings. Yet, new credit scoring policies are already in place to eliminate or lesson the effects of such items. For example, starting in July of 2017, most civil judgments and about half of all tax liens are supposed to disappear from credit reports. Then, starting on September 15, 2017, medical debt won’t stick to credit reports unless it is at least six months old. Therefore, this part of VantageScore 4.0 shouldn’t make that much of a difference in Ohio credit scores.
2 – With credit utilization rates, trended data will matter more than static data.
Part of your credit score depends on how much of your available credit you are using. Your utilization rate matters because lenders see over-reliance on credit as a risk factor in borrowers. With most credit scoring models, your score fluctuates according to how much of your credit you are using right now. This means that if you charge a large purchase that takes up 80% of your spending limit on a credit card, your credit score may drop.
With the VantageScore 4.0, this won’t happen. Instead, this system looks at your utilization history – or, how much of your available credit you typically use. This means that Ohio residents who normally keep low credit card balances and pay off their cards every month won’t be affected as much by a sudden, large purchase. Conversely, it won’t be as easy for consumers with high credit card balances to pay them off and get an immediate credit score boost.
How Ohio Consumers Can Get Better Credit No Matter with Any Credit Scoring Model
Ohio residents with mistakes and errors on their credit reports may have lower credit scores because of these inaccuracies. This is why it is important for all consumers to regularly check their credit reports. The Fair Credit Reporting Act (FCRA) entitles you to clean credit reports. It is under this federal statute that the experienced credit lawyers at the Law Offices of Gary D. Nitzkin work to fix credit problems – for FREE.
Don’t let errors on your credit reports bring your credit score down. At the Law Offices of Gary D. Nitzkin, P.C., we’ve been cleaning up credit reports for consumers since 2008 for free. How do we do it? The law allows us to collect our fees and costs from the defendants in any successful action. This is why our clients pay nothing for the work we do.
Let’s start the conversation about what we can do for your credit. Set up your free consultation today by calling Attorney Gary Nitzkin at (480) 771-6001 or sending him a message through our contact page.