NEW YORK — The math behind your credit score is getting an overhaul, with changes big enough that they might alter the behavior of both cautious spenders as well as riskier borrowers.
Most notably for those with high scores: Abiding by the golden rule of “don’t close your credit card accounts” may now hurt your standing. On the other side, those with low scores may benefit from the removal of civil judgments, medical debts and tax liens as factors.
Beyond determining whether someone gets approved for a credit card, a credit score can affect what interest rate and what spending limit are offered.
The new method is being implemented later this year by VantageScore, a company created by the credit bureaus Experian, TransUnion and Equifax. It’s not as well-known as Fair Isaac Corp., whose FICO score is used for the vast majority of mortgages. But VantageScore handled 8 billion account applications last year, so if you applied for a credit card, that score was likely used to approve or deny you.
Using what’s known as trended data is the biggest change. The phrase means credit scores will take into account the trajectory of a borrower’s debts on a month-to-month basis. So a person who is paying down debt is now likely to be scored better than a person who is making minimum monthly payments but has been slowly accumulating credit card debt.
“This is a really big deal,” said John Ulzheimer, an expert in credit reports and credit scoring. Ulzheimer said taking trended data into account has long been considered by the credit score industry, but hasn’t been implemented on a meaningful scale. He expects more lenders to adopt it.
People with high credit scores may be affected the most, since the goal of trended data is to see warning signs long before a borrower actually gets into serious trouble.
“When it comes to prime borrowers, you may not have bad behavior on your credit file, but a trajectory provides very powerful information,” said Sarah Davies, senior vice president for research, analytics and product development at VantageScore.
The change also shakes up the maxim that had people keeping open accounts they’d opened long ago. An important metric in calculating credit scores has been the portion of their available credit people are actually using. A person with $5,000 in credit card debt with a $50,000 limit across several cards could score better than someone with $2,000 in debt on a $10,000 limit because of that ratio.
But VantageScore will now mark a borrower negatively for having excessively large credit card limits, on the theory that the person could run up a high credit card debt quickly. Those who have prime credit scores may be hurt the most, since they are most likely to have multiple cards open. But those who like to play the credit card rewards program points game could be affected as well.
Taking civil judgments, medical debts and tax liens out of the equation comes after a 2015 agreement between the three credit bureaus and 31 state attorneys general. The argument was that civil judgments and tax liens —which can significantly hurt a person’s credit score — were often full of errors. Medical debt was being reported on a person’s credit report before there was time for insurance to reimburse.
People with those items on their credit reports now could see a bump of as much as 20 points. But it won’t help much if they also have negative marks like delinquencies and debts that have gone to collection.
Mortgages, though, won’t be affected. The government-owned mortgage companies Fannie Mae and Freddie Mac require a FICO score for eligibility. Because of their outsized influence on the market, few mortgage lenders use VantageScore.
Former Rockies manager Clint Hurdle used to refer to Todd Helton as “a professional hitter.” DJ LeMahieu has now earned his own card from the professional hitters’ union.
The documentary filmmaker returns to his hometown to talk about his 18-hour look at the conflict that shaped America
For parents of a school-age child, there are two things that converge at this time of year: spring-cleaning and the realization that you have accumulated almost a year’s worth of your kidR…
United Airlines will no longer allow crew members to bump passengers already on board flights a...
The move revives a discussion that has come up in the past, but never moved forward.
Relax Major changes coming to how your credit score is calculated stories
A multifamily apartment complex is planned to take over a closing Kmart’s spot as part of the gradual redevelopment of the Denver Design District, likely breaking ground by the end of 2017.
The new Westin hotel, public transit station and related improvements at Denver International Airport cost about $719 million, putting the signature project about $46.8 million over its most recent…
Bill O’Reilly’s tenure at Fox News became more imperiled Tuesday, with the lodging of a new harassment allegation against “The O’Reilly Factor” host and no apparent en…
Top Airport Parking, which offers discounted parking spots for $3.99 a day near Denver International Airport, on Tuesday began accepting bitcoin, Dogecoin and about 50 other types of digital paymen…
By Michael S. Rosenwald, The Washington Post In addition to serving as the country’s first bearded president, Abraham Lincoln is remembered for leading during the Civil War, freeing the natio…
By Suzanne S. Brown, Special to The Denver Post
Donald Trump’s surprise victory cast a spotlight on the so-called social media bubbles where people increasingly get their news and share views every day. During the campaign, many people sai…
United Airlines’ profit plunged 69 percent in the first three months of the year, and that was before the terrible publicity surrounding the dragging of a bloodied passenger off a plane.
China’s economic recovery is gaining traction, with growth rising to its fastest pace in over a year in January-March.
The open competition, launched in 2012, challenged applicants to produce a lightweight, affordable health kit that diagnoses and interprets 13 health conditions and continuously monitors five healt…
For the second month, Denver residents charged on their Chase credit and debit cards at a higher growth rate than the rest of nation, according to JPMorgan Chase Institute.
Carrying credit cards is a daily habit. Is there a reason to have so many different accounts?
Visa Inc. and Mastercard Inc. pushed back the deadline for installing chip-card readers in U.S. gasoline pumps after station owners complained they didn’t have enough time to complete the mul…
Billingsley played RB and WR in college and spent most of last season on the Lions' practice squad
Remember when the former Eagles receiver was facing a mandatory minimum of 3.5 years in jail?
They join the growing trend of National League teams opting for four-man benches and eight-man bullpens.
The late-night comics take a look at Tax Day. After you watch our favorite jokes, vote for yours at opinion.usatoday.com.
One mantra stuck in Gwyn's mind as they filled out stacks of paperwork, prepared their profile book, and answered tough questions about what kind of child they could parent.
Letter to the editor: If the richest Americans had to give away most of their income, they'd settle for far less.
Robert Robb: U.S. Supreme Court says you shouldn't use race in drawing political boundaries - except when you should.
Earnings at The Associated Press shrank substantially last year compared with 2015, when the news or...
Some Atlanta United fans were not thrilled with Tuesday’s news that Mercedes-Benz Stadium&rsqu...
Delco Proper is coming to Philly. Or, at least two if its stars are.