Q: I’ve heard that the Vantage Score system is getting an overhaul. What kind of changes are being made and how will this affect the way my score is calculated?
A: The Vantage Score, which dictates the way credit bureaus — Experian, TransUnion and Equifax — determine your credit score, is going through a shake-up this fall. The company is looking deeper into specific circumstances and what they say about your financial responsibility. Having a favorable credit score comes into play when you need to qualify for financing on a new car, if you’re opening a new credit card, or you want to take out a loan. In each of these scenarios, your credit score is the most important deciding factor for your approval, and will also influence your terms and interest rates. It’s important to note that the new system will not impact mortgage loans. This is because few mortgage lenders use Vantage Score; most use FICO scores to verify eligibility. The changes will affect the credit scores of many people, though, for better or for worse. It’s wise to learn all you can about these changes so you can make the necessary adjustments to your credit behavior. Lucky for you, we’ve made it easy! We’ve broken the changes down into the three main areas they impact, and then we’ve simplified it by telling you what these changes mean for you.
What it means for you: Under the modified system, Vantage Score won’t just check if you’re meeting your minimum monthly payments; it will consider trended data, too. This means the company will analyze the trajectory of your debts on a month-to-month basis. They want to know the direction in which your finances are going. Are you gradually paying down debt, or are you scraping by with the minimum payments as your balance slowly grows?
What it means for you: In the past, your score wasn’t affected by growing debt as long as you were making the minimum payments on your cards. Now, if you’re careful about making the monthly payment but your balance is increasing each month, your credit score will take a hit. Conversely, if you’re working toward actually paying down your debt, your score will likely get a boost. If you don’t fall into this category, it’s time to get serious about doing away with your debt for good. Even small steps toward this goal will be recognized and rewarded.