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The Newest Credit Scoring Model: VantageScore 4.0


The Newest Credit Scoring Model: VantageScore 4.0

To many people, FICO is king when it comes to credit scoring models. The majority of lenders, most notably those in the mortgage industry, rely either exclusively or at least heavily upon FICO scores as they evaluate the credit worthiness of new applicants for financing. However, with the introduction of VantageScore 4.0 in the fall of 2017 many lenders are starting to pay a bit more attention to this newest arrival to the world of credit scoring.

In truth, VantageScore Solutions (the company which creates and sells VantageScore credit scores) is not so new. It is only new when compared with the Fair Isaac Corporation (FICO). VantageScore Solutions, founded by the 3 major credit reporting agencies themselves in 2006, is actually over a decade old. 

Yet most lenders still prefer FICO scores. FICO was initially founded in 1956 and created its first credit scoring system in 1958. The credit bureaus themselves began to adopt FICO credit bureau risk scores between 1981 (Equifax) and 1991. According to FICO its scores are currently used by 95% of the largest financial institutions in the country.

VantageScore 4.0

Though the company is already dominate in direct-to-consumer credit score sales, VantageScore Solutions has been fighting for over a decade to dip further and further into FICO's lender-purchased credit score market share. This goal is achieved by convincing more and more lenders to purchase VantageScore's credit scores to use for risk analysis in prospecting, account management, and application reviews. The roll out of the 4th generation of its scoring model in the fall of 2017 will be just one more step toward this goal, but might be better described as a giant leap instead of a step.

The reason the release of VantageScore 4.0 is such big news is because it will be the first credit scoring model to consider trended data in the calculation of consumer credit scores.  Trended data, added to credit reports several years ago, allows credit card issuers to report a 24 month history of historical balances and payment amounts made by their customers. This historical data can show future lenders whether you are truly someone who pays off your credit card balances in full each month (aka a transactor) or whether you are in the habit of revolving an outstanding balance from one month to the next (aka a revolver).

Revolvers, especially minimum payers (consumers who only pay the minimum payment due on their credit card bills) represent a higher level of risk to lenders. In fact, according to a study conducted by Experian, minimum payers are 6 times more likely to have a future delinquency than transactors. TransUnion's study on trended data found that revolvers represent between 3 to 5 times more risk than transactors.

Including trended data in VantageScore 4.0 gives this new scoring model increased predictive power over previous generations of VantageScore and, arguably, FICO scoring models as well. In other words, this new scoring model is being touted as a more reliable way to predict credit risk. Predicting risk, after all, is why lenders purchase credit scores in the first place.

Advice for Consumers

Because of recent changes in credit reporting, especially the upcoming removal of many tax liens and judgments from credit reports and the removal of many medical collections as well, lenders and credit score developers are going to begin paying more attention to alternative credit data which is also predictive. It has always been important to pay off your credit card balances in full each month both from a credit scoring perspective and also from a financial perspective as well. However, with the consideration of trended data now in the works the importance of paying off your credit card balances has multiplied exponentially.

Of course implementing a new credit scoring model is very expensive for lenders. Due to the high cost it will likely be years before a majority of lenders begin using VantageScore 4.0. The same can be assumed for any yet unannounced but potentially forthcoming new releases from FICO which consider trended data for that matter.

As a result consumers do not necessarily have to worry about trended data impacting their credit scores for a while. Still, remember that when credit scoring models which consider trended data are finally adopted by lenders those models will be looking back at a 24 month history of your credit card payments. This means that the time to develop the habit of paying off your credit card balances monthly is now.



Michelle Black is an author and leading credit expert with over a decade and a half of experience, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars across the country. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.


Beware of Phantom Debt Collectors


Beware of Phantom Debt Collectors

If you have ever been in the unfortunate situation of receiving a call from a debt collector, especially a third-party collection agency, then you are all too familiar with the stress and fear that such calls can introduce into your life. Obviously you will never find a consumer who enjoys receiving collection calls and many collection agencies are known for their unsavory collection tactics. However, in the spirit of fairness it is worth pointing out that sometimes legitimate collection agencies are vilified due to the actions of illegal or phantom debt collectors.

While not all collection agencies behave badly, there are many bad apples in the industry who do routinely use scare tactics and even illegal methods in an effort to collect outstanding debts. However, there is a brand of criminal debt collectors who are much worse. Phantom debt collectors, as these criminals are commonly called, are illegitimate "companies" who actually make up debts that were never really owed in the first place and try to frighten people into paying these phony debts.

How Phantom Debt Collectors Operate

Simply put, phantom debt collectors are scam artists - often very skilled scam artists. These scam artists will call unsuspecting consumers and try to convince them to pay debts which are not actually owed. Often these phantom collectors are armed with information acquired through identity theft so, even though they may reference an account which you recognize, the scam artist will try to convince you that the loan is due or that you owe more than your legitimate balance. Additionally, while all phantom debt collection scams are a little different, these scam artists will always try to convey a sense of urgency and will generally threaten serious consequences if you do not pay immediately via a credit card, debit card, or wire transfer. Obviously these practices are 100% illegal.

Recognizing the Difference

Unfortunately the phantom debt collection scam is probably not going away any time soon. In fact, the CFPB recently shut down a massive phantom debt collection scam which was utilizing robo-calling technology (enabling them to prey upon thousands of victims) in April of 2015. Due to the fact that phantom debt collection scams have become so common it is important to understand how to protect yourself from these would-be-predators. Here are 3 tips.

1.      Debt Verification
When a collection agent calls you regarding a debt that you are not sure whether or not you owe remember that you have the right under the Fair Debt Collection Practices Act (FDCPA) to request a verification of the debt. If the person on the phone refuses your request then the call is likely a scam.

2.      Call Your Creditor Back Directly
Received a call from someone claiming to represent a creditor with whom you do have a relationship? Remember you can always hang up and call the creditor back directly at the number on your statement to ensure that the person you were speaking with is truly affiliated with your creditor.

3.      Check Your Credit Reports
If someone calls you attempting to collect a debt that you do not recognize then pulling a copy of your 3 credit reports is a wise idea. You can pull your three reports for free each year at or, if you have already accessed your free reports, you can always get a copy of your 3 reports + 3 scores online from a reputable credit monitoring service like those found here. When you pull your reports you should verify whether or not the account which was mentioned to you over the phone actually appears on your credit. If the account does not appear on any of your credit reports then the call could possibly be a scam. 


Michelle Black is an author and leading credit expert with over 13 years of experience, the credit blogger at, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here. 


How to Rebuild Your Credit After Bankruptcy


How to Rebuild Your Credit After Bankruptcy

Filing for bankruptcy protection from creditors certainly has a long list of benefits. Bankruptcy can stop creditors from suing, it may put a stop to wage garnishments, and it can even grind foreclosure proceedings to a halt -  at least temporarily. However, while bankruptcy has its list of benefits it also has a very significant downside. In the majority of circumstances, filing for bankruptcy is likely to utterly destroy a consumer's credit scores.

While it is completely true that filing bankruptcy is virtually guaranteed to have a severely credit score impact, it is not true that consumers who have filed for bankruptcy cannot begin to rebuild healthy credit again once the bankruptcy has been discharged. Even though the evidence of the bankruptcy filing will remain on a consumer's credit report for 10 years in the majority of cases, consumers can still begin taking steps to improve their credit scores even while the bankruptcy is still present on their credit reports. Here are 3 simple tips which can help your credit to begin recovering after a bankruptcy.

1. Check your credit reports for errors.

In 2013 the Federal Trade Commission estimated that there were around 40 million mistakes present on consumer credit reports. Mistakes on credit reports are not unusual. Consumers who have recently had a bankruptcy discharged are no exception to the rule.

If a consumer has filed bankruptcy then he should check both the public records section of his credit reports to ensure that the bankruptcy itself is being reported properly and he should review each of the individual accounts which were included in his bankruptcy for errors as well. Should a consumer discover credit reporting errors (i.e. a discharged bankruptcy being reported as "filed," duplicate listings of a single bankruptcy, accounts reporting late payments after the bankruptcy was filed, accounts reporting balances after the bankruptcy was discharged, etc.) then it will unfortunately take some work to correct the errors.

A consumer can opt to dispute any errors he discovers on his own or he can also hire a reputable credit repair professional for assistance. Either way, it is extremely unlikely that credit report errors will fix themselves so ignoring the problem is not a solution.

2. Hone your credit management skills.

Many consumers file bankruptcy due to a financial catastrophe caused by an illness, job loss, or even a death. However, there are many other consumers who file for bankruptcy due to financial problems brought about by irresponsible credit management habits. In other words, these consumers spent more money than they earned.

For consumers who find themselves in the 2nd category, here is the first piece of advice I have to offer - shake it off! While that advice may sound a bit cliché, it is still worth following. Living in guilt over past credit mistakes is not going to undo those mistakes. However, obsessing over past mistakes might keep you from moving on and making positive changes in the future.

Consumers looking to hone and strengthen their credit management skills should start by drawing up a written plan for how to handle their finances - aka a budget. CLICK HERE for a free copy of the HOPE4USA Budgeting Worksheet to get started. It can also be helpful for consumers to have an accountability partner who can help to check up on their new commitment to manage money better.

3. Re-establish current credit.

One of the smartest strategies that a consumer can employ to begin recovering from a bankruptcy is to re-establish positive credit card right away, especially in the form of credit card accounts. Of course positive accounts will not completely overshadow the fact that a bankruptcy was filed; however, beginning to show positive credit management habits post bankruptcy can go a long way towards counteracting the impact of the bankruptcy upon the consumer's credit scores.

Many consumers will wonder, "What bank is going to approve me for a credit card with a bankruptcy on my credit reports and bad credit scores?" The answer is a bank which offers secured credit cards. When a consumer opens a secured credit card the issuing bank will require the consumer to make a deposit with the bank equal to the amount of the credit limit on the card. For example, a consumer would make a $300 deposit to receive a secured credit card with a limit of $300. Due to the fact that the account is "secured" with the consumer's own funds these types of credit cards can often be qualified for easily in spite of low credit scores and credit blemishes like discharged bankruptcies. 


Michelle Black is an author and a credit expert with over a decade of experience, the credit blogger at, 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, credit reporting, correcting credit errors, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.