Lenient Vantage Credit Scoring Model Little Used
Lenient Vantage Credit Scoring Model Little Used
The already lenient Vantage Credit scoring model has been revamped. Now called Vantage 3.0 it has become even more lenient. FICO is by far the most widely accepted credit scoring model in the money lending industry. Vantage is used by less than 10 percent of lenders. It is sometimes derided by industry professionals as your FAKO score. It is wise to remember that it’s primary use is as an educational score. When this score is furnished to consumers through the various credit monitoring services it can result in a false sense of optimism. Wishful thinking gets borrowers nowhere except into bad decisions, false hopes and unnecessary inquiries.
Latest Changes to Vantage Credit Scoring Model
The most important change to Vantage is the decision to cease punishing consumers for paid collections that appear on the credit report. Those who plunge into trying to repair their credit history are always shocked to find out that paying off old collections can cause more problems than it cures. Vantage considers paid collections to have little predictive value as to possible future defaults. Old collections that were due to expire after 7 and 1/2 years will become renewed and treated as a fresh matter by the computer’s algorithm. Most would have to agree that this is patently unfair. FICO stands by this practice although it is hard to see how this is predictive of future reliability of the consumer. The old debt will still be deleted 71/2 years after the date of first delinquency. Since January of 2009 FICO considers only collections over $100.00
Legislation was reintroduced in Congress this year to require consumer reporting agencies to remove fully paid or settled medical debt information within 45 days of resolution. This would be a wonderful thing since medical debt accounts for more than half of all collection activity. Medical billing with its unanticipated co pays and lab charges can be very confusing to the most diligent consumer. Mortgage lenders will still see this medical debt when they closely examine your credit report and weigh them according to their own view as to their merits.
Vantage formerly rated consumers on a scale of 501-990. A recent court decision has now allowed them to mimic FICO’s 300-850 range for the future. How big a spread there will be between the 2 scores depends on a wide range of factors. You can be sure it will be big enough to make a difference between a yes and a no in many cases. This does not mean that your Vantage and FICO scores will be the same.
Another change of note by Vantage is to now treat First mortgages differently than HELOC‘s or home equity loans. Research has indicated that more than twice as many First mortgage loans are defaulted upon as home equity loans.
Vantage Credit Scoring Model to include More Consumers
For young people, immigrants and people who don’t use the banking system for a variety of reasons it can be difficult to establish a credit scoring file with FICO. FICO requires at least 6 months account history with at least 1 account reported in the last 6 months. Vantage only requires 1 month history and 1 report within the last 2 years. Vantage will include data ignored by FICO consisting of rent, utility and cell phone payments. People who had credit but weren’t using it for the last several years are eligible for Vantage scores. Also those with no recent activity who may have dropped out of the system for a while. The critically important debt to available credit ratio which counts as 30% of your FICO score only counts as 23% of your Vantage score. For FICO timely payments are the biggest component of your score at 35 percent of the total. Vantage counts the timely payments component as 32 percent of the total picture.
Vantage Credit Scoring Model to Take Recession into account
Vantage claims its new system is so detailed that it can actually take into account those who had no credit problems before the recession then had them but are now back on their feet. This is certainly welcome news to many. I don’t see FICO following this new practice unless it proves predictive. Only time will tell on that topic as data accumulates. Vantage also claims a new policy of considering problems caused by a natural disaster such as Hurricane Sandy as a special category. This is a very worthy effort although I would like to know exactly how it will be implemented. It would not be easy to be fair in deciding how far to take this policy.
Consumer Vantage Credit Scoring Model Score Good, FICO Bad: What now?
This is the real question. What good does a good Vantage score do you? If the lender doesn’t use this model it does you no good at all. “Feel good” credit scores produce false confidence, rejections and unnecessary inquiries for loans the consumer had no hope of getting. I can only recommend that if you have been following your score using the Vantage model you pull your actual FICO score for a small fee from FICO.com to see what they say. Vantage will always be higher than FICO. Pulling your own score has no negative effects no matter how many times you do it.