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3 Great Lessons You Can Learn From Vantagescore 3.3 | vantagescore 3.3

Vantagescore 3.0 adds more consistency to the old credit scoring formula and makes good credit scores readily available to many consumers with little financial background. Editorial Note: The information on this site is not intended to be used in place of, or in conjunction with, professional financial advice relating to credit cards, loans or mortgages. Not every individual in need of credit will qualify for credit. Not every lender will give credit.

The biggest change in vantagescore 3.0 is a greater flexibility for the creditors to whom they can provide credit. Previously, most lenders had very specific requirements for what qualified borrowers could apply for and were willing to approve. These days, however, many lenders have expanded their criteria for approval, and vantagescore has adjusted accordingly. The following is an analysis of how the new vantagescore 4.0 changes can benefit everyday consumers.

For many years, consumers could qualify for a good credit score, depending on their income and other factors. However, a review of the vantagescore 3.0 credit scoring models indicates that there may be some obstacles to qualifying for loans or mortgages. The vantagescore 3.0 credit scoring model was based on the number of days that the consumer had been employed. In order to increase the likelihood of getting approved for a loan, the scoring model for approval was designed to penalize those who stayed unemployed too long. This meant that borrowers who stayed out of work too long would have their credit scores lowered, or no credit scores at all. This was a major problem for many consumers, especially those who are young and inexperienced with credit.

To make up for this, the vantagescore 3.0 model includes a number of factors that are designed to penalize those that re-apply without changing their employment status, such as those who quit their jobs before reaching the three national credit hour mark. In addition to penalizing borrowers who are re-applying without changing their employment status, the vantagescore 3.0 model also focuses on borrowers with weak credit histories. While these individuals will typically not see a significant drop in their credit scores, their chances of being approved for financing will decrease dramatically.

Another element of the vantagescore 3.0 credit scoring system that will have a significant impact on consumers is the elimination of ignored collections accounts. Although these accounts may not show up under the vantagescore scoring models, they do have a significant impact on overall consumer scores. Over 30% of all consumers have one to two collections on their credit report that are considered “ignored”. The vantagescore eliminates these “ignored” collections from the credit score, which can translate into significantly lower credit scores.

Credit scoring models often use a one or two point deduction for “ignored” collections. This doesn't mean that the entire credit score is going to be lowered due to these points, but it does mean that there is a good chance that a consumer could see a significant drop in their credit scores. Many people who have multiple collection hits on their credit report are likely to have trouble recouping all of their debt, which could further impact their credit score. If a consumer's credit history is suffering because of a large number of these collections, it is likely that these issues will continue to affect their credit scores in the future.

The final factor that the vantagescore will consider is the amount of available credit utilized by the borrower. This factor penalizes lenders that provide loans to consumers that consistently fail to meet their monthly credit utilization obligations. This includes any type of personal loans that are provided, as well as car loans and mortgage payments. The vantagescore attempts to determine the average amount of available credit per month and compares this amount to the percentage of available credit to determine the lender risk. If the lender is deemed to be a high-risk entity, the Vantagescore will negatively affect their credit scores. Because this scoring model rewards lenders that provide loans to high-risk borrowers, it is likely that any individual that has numerous high-risk accounts will experience a decline in their credit scores.

Overall, vantagescore 3.0 makes changes to the way that many lenders calculate risk and the formulas that they use to determine the riskiness of different lending entities. While some have predicted that this new formula will cause a significant change in the way that many lenders evaluate and assess risk, few, if any, lenders have indicated that they will immediately stop using the vantagescore in their credit scoring models. Because of this, it is likely that this formula will become more used by lenders as time goes on. However, it is also likely that over time, the use of this formula will become less because the formula will be universally accepted by most lenders and across most types of accounts.


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