VantageScore: Updates in Calculation Methods
in Blog

Earlier this month, it was announced the VantageScore will be rolling out a new formula.  The new calculation will be based on borrowing behavior over time instead of a snapshot of credit usage at time of credit pull.  Your credit union might be using FICO today, but with this information be widely circulated, which way will the consumer go in attempting to improve their credit score?  If they listen to the guidance for the new rules of VantageScore, they could adversely affect their FICO.

What does VantageScore for the member?

  • Pay Down Debt ASAP - Scores will be rewarded by paying down debts faster.  Traditionally, members’ scores wouldn’t be affected as long as they were making the minimum payments.  
  • 502 Bad Gateway Utilization Ratio - The current system factors in a member’s utilization.  When a member would make a large purchase, they may have seen a temporary decrease to their score.  However, since the new system factors in history, so that may not be affected as much as it was previously.
  • Average Age of Accounts – In the new system, members should be encouraged to close unused credit cards as having high credit limits could affect the score because the member would have the ability to rack up debt quickly.
  • 502 Bad Gateway

    Medical Collections
    – In the new system, medical collections that are less than six months old will be ignored to allow for more time for insurance payment processing.  In addition, medical collections will be distinguished to not penalize the member as much as other types of collections.

The new method isn't set to take effect until the later 2017.

Read the Press Release from VantageScore.