Debt ridden individuals may get some relief as a number of changes biased in favor of them are expected to arrive. This will be in form of how an important credit score gets calculated. VantageScore is a model of credit scoring crafted by three important credit reporting bureaus: Experian, TransUnion and Equifax. This score will put increased weight on trends present in an individual's credit report.
For the better
These changes also aim to solve an issue which could hurt people having good credit scores- but temporarily have succumbed to debt due to a high value purchase. A few consumers could anticipate that their credit score may go down, even of they plan to pay their cards on time and in the full amount. The new scheme will factor in the fact that the consumer has an excellent history of maintaining a low card balance. It follows that the score would largely remain unaffected.
The trends will incorporate whether they are paying off the credit cards- or getting deeper into debt. This new data will offer increased context to the debt load of the consumer. It will also help lenders to have a better holistic view of the credit behavior of a person and also the risk level of that person. The new scoring method can be better illustrated by an example of two individuals using 50 percent of spending limit as permitted by their particular credit cards. As per the present scoring models, both borrowers will be bruised by too much card use. This is because lenders like to see their customers using not more than 30 percent of the available credit.
The new VantageScore model, however, will differentiate between the two. One person could appear better if the report shows that person is paying off the debt and also using much less of the total credit. On the other hand, if the other person goes deeper into debt, then lending money to that second person will be regarded as a risky proposition.
This VantageScore model will not dramatically vary what the consumers can do to improve their personal credit scores. It is vital to pay off the bills every month. In case the individual have debt, particularly of the credit card kind, that person must be working to pay that off. It is vital to show that progress has been made over time.