New credit reporting system helps low or no credit customer

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BOARDMAN, Ohio (WKBN) – There are some changes coming to the way credit scores are calculated.

In the past, credit scores were likely determined through a FICO score. The score is created by the Fair Isaac Corporation, which assesses credit risk based on information from credit bureaus such as Experian, TransUnion and Equifax.

Now, those three credit reporting companies have developed the Vantage Score. It uses “trended data,” meaning it will look at your debt on a month-to-month basis, which could help those with little or no credit. Starting next year, that’s how most credit scores will be calculated.

Brian Laraway from Bury Financial Group in Boardman said the new calculations focus on not necessarily how much debt you have but what the debt is.

“What they are going to do is actually look at are you paying your cell phone bill on time? Are you paying your rent on time? Those types of things versus how much debt you have out there. It is going to be a little more flexible,” Laraway said.

Laraway said borrowers should be aware that having a high credit limit could hurt a score based on the theory that there is the potential to run up debt. Making monthly payments on time and paying down debt is helpful as well as paying more than the monthly payment.

The Vantage Point system would help those who have zero debt to establish credit by looking at their monthly payments.

With the new Vantage Point system, it could be advantageous to close credit accounts you are not using or paid off but check with a financial professional for precise guidance in what accounts to close or leave open.

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