Will the New Credit Scoring Model Help Me?

New Credit Scores

Have you heard about the new credit scoring model that has just been released? I have had a ton of questions this week regarding the new version of VantageScore and I know that many of our readers are wondering how this new scoring model will affect them. So, here's the skinny, the scoop, the 411 about the new, potentially exciting version of VantageScore. First of all, for those who are confused, let me explain exactly what the VantageScore is and how it is used.

VantageScore is the credit scoring model created by the 3 major credit bureaus - Equifax, TransUnion, and Experian. A credit score is a number which represents your creditworthiness, a number that lenders rely upon when deciding whether or not to loan you money for a car, a home, etc. If you visit one of the 3 credit bureau's websites and pay to pull your credit report you can receive a copy of your VantageScore. However, while VantageScore is used by some lenders, the vast majority of lenders will look at your FICO credit score anytime that you apply for a loan. (FYI, if you want to access your FICO scores you can do so for a fee at www.myfico.com, but only from 2 of the 3 major credit bureaus.)

FICO scores and VantageScores are different because they use different scoring models to determine a consumer's credit score. The range of a FICO score is between 300 and 850. Previously, the range of a VantageScore was between 501 and 990. However, under the new VantageScore 3.0, the scoring range is being changed to match FICO's range of 300 to 850. I believe this is a great move for consumers because it will help to reduce some confusion with regard to credit score ranges. Still, even though the scoring ranges will match a consumer would still have a different VantageScore than his/her FICO score. For example, if Joe Consumer has a 680 VantageScore under the new scoring system he will not automatically have a 680 FICO score. The reason for the score difference is because both VantageScore and FICO have different scoring models - an action (i.e. paying off a collection account) may trigger a score increase under one model, but no increase under the other.

The most exciting change for consumers under VantageScore 3.0 is how the scoring model treats paid collection accounts. The previous version of VantageScore would factor collection accounts into the credit score for 7 years, even if the collection account was paid or settled by the consumer. So, under the previous model a collection account with a $0 balance would hurt a consumer's credit scores. VantageScore 3.0 will NOT factor paid/settled collection accounts into a consumer's credit score. A consumer who has $0 balance collections on his/her credit report but no additional negative activity will likely see a significant increase in their VantageScore. This is a very big change and, in my opinion, great news for the consumer.

Unfortunately, as I mentioned above, this change only applies to VantageScore 3.0, not FICO. Since the large majority of lenders currently use a FICO scoring model the new changes will probably not help someone who is applying for a mortgage or a vehicle. We can only hope that, in the future, FICO follows suit and changes their scoring model as well or that more credit grantors begin to adopt the VantageScore for use in their lending decisions. I would not expect any immediate changes, but I do believe the new VantageScore scoring model is a win for consumers.

Michelle Black is an 11+ year credit expert with HOPE, the credit blogger at www.HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.

Out of the Box Summer Savings Ideas

Check us Out in

Fort Mill Magazine!

We are featured in the Summer Issue of Fort Mill Magazine! Click here to see the digital copy and check out page 40 for some great summer savings ideas courtesy of our very own Michelle Black. Healthy credit begins with a healthy budget. If your budget is in need of an overhaul then these fabulous tips on saving money may be exactly what you need to give your finances a kick start.

Need tips on how to sell your home ? Don't miss page 34 for "10 Tips to Sell Your Home Fast." Keller Williams Realtor, Jen Mildenberger has some wonderful - not to be missed - advice for you if you plan to put your home on the market in the near future.

So take a minute, check out the issue, and be sure to drop us a line on Facebook or Twitter to let us know what you think.

Saving Money - Part 2

Saving Money - Part 2  By Michelle Black

Have you ever found yourself in a place where you have more bills than money? Money shortages lead to a poor credit rating, marital stress, and the inability to provide the things your family needs.  One of the first things you will want to do if you find yourself in a situation where your budget is unbalanced is look for a way to start saving money. We hope today's tip will be helpful.

Tip #2: Ask for your bills to be lowered. Similar to yesterday's tip regarding asking for your credit card interest rates to be lowered, you can also request for many of your monthly bills to be lowered as well.  Try calling your cable company, explain that you have seen some great offers for satellite TV and that you are considering switching services. However, before switching, you wanted to check with them to see if they could offer you a lower monthly rate. While you are at it, ask for your internet service bill to be lowered as well. I have personally saved money off both of these monthly services just by calling and kindly making the request.

Other monthly bills you may be able to get lowered with a request include your cell phone bill (even if you are currently under contract), your lawn care bill, your newspaper subscription, your insurance bill, etc. By calmly and politely making the request you can save yourself a lot of money. When making the request for your bill to be lowered please keep the following in mind:

1. Always be polite and calm. Getting angry will most likely insure that you do NOT get the bill reduction you need. 2. Explain why you need for the bill to be lowered. For example, "I have seen an offer for a better rate" or "I cannot afford to continue making such high payments and I'm trying to balance my budget." 3. Ask for a supervisor if necessary. The first customer service agent you speak with likely will not have the authority to lower your bill. 4. Don't take no for an answer. If the supervisor refuses your request politely explain your reason for needing the bill lowered again and ask "What can you do to help me please?"

Remember to check back with us again for part 3 of our money saving blog series. Saving money can help put you on the path towards a balanced budget and even a healthier credit report! If you need personalized credit or budgeting advice please feel free to give our friendly staff a call at 704-499-9696.

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Why Are Credit Scores Important?

So, you likely already know the basic principle about what a credit score is used for and, therefore, why it is important to have a good one.  Whenever you apply for a loan (car loan, mortgage loan, credit card loan, personal loan, etc.) a lender is going to look at your credit score and decide whether or not you qualify.  If your credit score is high enough, you can likely expect to be approved for the loan (provided you earn enough income to qualify). However, a low credit score could result in you being declined for the loan you want or, if you are approved, it could mean a higher interest rate and a bigger down payment.

To put it simply, credit scores (and your credit report) are a type of report card which future lenders get to look at when you apply for a loan.  The “report card” shows lenders a picture of how you pay your bills – on time, late, or not at all.  If your credit report shows that you have a history of paying your bills on time then future lenders will want to loan you money as well since, chances are, you will pay the payments on time and they will be able to earn a profit from you in the form of interest.  However, if your credit report shows that you have a history of paying your bills late or not at all then future lenders will be scared to loan you any more money.  The reason they will be hesitant to loan you more money is because chances are higher that they may not get paid back for their investment, much less make any kind of profit through interest fees.

In our current culture, credit scores impact our lives in many ways.  I already mentioned how you will need a good credit score to qualify for any type of loan.  However, did you also know that your credit score may be used to determine you auto insurance rate and whether or not you have to put down a deposit when opening a new utility or cell phone account?  Plus, it is now a common practice for employers to pull your credit score when you are applying for a new job.  Depending upon the industry in which you work, your current employer may even access your credit report to determine whether or not you are “credit worthy” to remain employed with the company.

Since credit affects so many different aspects of our lives, it is more important than ever to have a healthy credit score.  However, if you find yourself in the uncomfortable situation of having a subprime credit score (a consumer score of 649 or lower) then HOPE would like to encourage you to give our credit experts a call.  Remember, you do not have to feel embarrassed or defeated due to a subprime credit score!  Bad credit scores happen to good people all the time. In fact, over 60 million American currently have a subprime credit score so, if you are in the same boat, you certainly are not alone! You still deserve to be treated with dignity and respect. Don’t ever let anyone make you feel otherwise.

You can make a plan today to start improving your credit scores.  Please contact us via email or phone at 704-499-9696 to learn more about how the HOPE Program can help you to achieve the healthier credit you desire! 

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Protecting Yourself from Identity Theft - Part 10

Protecting Yourself from Identity Theft Part 10 by Michelle Black

Thanks very much for “tuning in” today for our 10^th and final tip regarding identity theft prevention.  I hope that you have enjoyed this blog series as much as I have enjoyed writing it.  By following today’s tip and all 9 previous tips outlined in this series you can drastically reduce your chances of being victimized by ID thieves.

#10:  Take Your Name Off Promotional Lists.

When taking strides to reduce your risk of identity theft, it is definitely a good idea to opt out of pre-approved and promotional offers. Remember, in part 3 of this blog series where I wrote about “dumpster divers?” Dumpster divers are thieves who steal personal information right out of your trash can. It is very easy for a thief to steal a pre-approved credit card offer that was sent to you (especially if the document is thrown into the trash without being properly shredded) and apply for an account in your name with a new address. Nearly half (43%) of all identity fraud originates from stolen wallets and/or stolen paperwork. By removing yourself from these promotional mailing lists you can avoid this risk all together. Thankfully, it is pretty simple to have yourself removed from these lists. Just visit www.optoutprescreen.com to get started.

At HOPE we know that being a victim of identity fraud is a nightmare. Once a fraudulent account appears on your credit report it can been almost impossible to see it removed without having to pay for the account out of your own pocket unless professional assistance is used.  In fact, 70% of ID theft victims have difficulty removing the fraudulent information that resulted from ID theft from their credit reports (ITRC Aftermath Study).  If you have been a victim of ID theft (or you suspect that you have been a victim of ID theft) then we invite you to give our team of credit experts a call.  You can schedule a no-obligation credit analysis appointment with HOPE to see how much damage has been done to your credit report and what it will take to help you turn the situation around. For more information or to schedule your appointment please call 704-499-9696.  We would love to help you kick identity theft issues or any other credit issues you may be facing to the curb!

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