New reasons to get credit when credit is due

Denials are common for many who apply for credit. In fact, an estimated 70 million Americans don’t even have enough information on their credit report to have a score! The most-affected include young people, immigrants, the “unbanked” and stay-at-home spouses and partners. But things are changing:

• A movement toward “non-traditional” data like rent, utilities, telephones and insurance is being incorporated into some credit scoring models. Good payment history on these bills will help boost the score. While this is great for young consumers and others who are begining to build credit history, it can have negative effects for consumers who fail to make timely payments.

• New credit regulations for stay-at-home partners means that these consumers can use shared income when applying for credit accounts or limit increases, making them more likely to get approved. Before this change, these consumers were viewed as a higher risk and were often thought of as being unable to manage debt. This amendment will provide greater access to credit for American families. This is expected to directly impact 16 million people who are married but do not work outside of their home. Credit card issuers have six months to comply to this new regulation.

• A new scoring model, VantageScore 3.0, recently announced that its model will allow for around 30 million more consumers to have credit scores. This model takes into consideration factors that others scores may not. VantageScore claims to include consumers who have not used credit recently, consumers who currently have no open accounts (likely due to a history of bankruptcy or collection issues), and those who stopped using credit but have recently started again (within the last 24 months).

• Credit score forgiveness for paid collection accounts means that while these blemishes stay on your credit report for seven years, if paid, they will not drag down the score. Under the new VantageScore 3.0 model, paid collections accounts will not negatively impact credit scores. This change will allow more consumers to have a “second chance” if an account goes to a debt collection agency. Consumers who have an account in collections also have more incentive to pay off the account in order to enjoy easier access to future credit.

Will these changes make building credit easier for you?