In the next few months, there will be changes to how your credit scores are calculated by the three major credit bureaus. Specifically, the bureaus will adopt the new VantageScore system. The following information will be treated differently under the new scoring system:
- Medical bills: VantageScore attaches less importance to unpaid medical bills. In fact, it will ignore debts that are less than six months old. This could make it easier for you to contest medical bills before they can damage your credit scores. In addition, past due medical bills will hurt your score less.
- Tax liens and civil judgments: VantageScore does not report civil judgments or tax liens unless those records contain certain identifying information. For example, they would have to include your name, address, birthday and Social Security number. These changes were also adopted by the new FICO scoring system.
- Credit utilization: Under VantageScore, a greater emphasis is placed on how you utilize your credit over time. For example, making a large purchase with a credit card may no longer hurt your score so long as you promptly repaid the debt. However, you could take a negative hit to your credit scores by opening many different credit accounts. In addition, your score could also decrease if you only pay the minimum on your debts each month.
- Credit history: With the new VantageScore system, individuals with shorter credit histories may have an easier time accessing loans.
What Do These Changes Mean for My Credit Score?
Depending on your spending habits and the type of information contained within your credit reports, your score could improve. However, VantageScore will not be used by all lenders after these changes go into effect. On the other hand, FICO recently made some changes to its scoring model. FICO scores will no longer include tax liens and civil judgments without certain identifying information. This could improve the credit scores of some people by 40 to 60 points.
The Kansas City bankruptcy attorneys at The Sader Law Firm can help people find solutions for difficult financial situations.