New Credit Scoring Could Help Millions
A potential new way of dealing with debts for credit scores could help millions of people who have little or no credit history.
As CNN reports, the current way of calculating credit scores includes any and all debts that go into collections, whether they have been paid off or not, for up to seven years. Under the new system, debs that have been paid in full or settled would no longer be factored into credit scores.
Those suffering from the effects of a natural disaster would also benefit from the new system, as it would allow for natural disaster victims to benefit from responsible credit behavior, like making payments on time, and would continue protect them against negative accounts during those times.
Under the old system, negative and positive accounts were both ignored after a natural disaster, which made it hard for people to improve their scores.
This new system would only be available through VantageScore. (FICO is currently the more popular credit scoring model.)
People with limited credit histories stand to gain from this new method of scoring as well, since rent and utility payment records will also be taken into consideration. John Ulzheimer, president of consumer education for SmartCredit.com, told CNN that the new method would “allow it to score as many as 30 million people who previously couldn’t get a credit score, and potentially help them qualify for more competitive credit rates.”