Trended credit data goes beyond the numbers on your credit report to form a more complex and nuanced view of your long-term credit history and behaviors. By factoring in a consumer's credit trends over time, as well as alternative data (like utility and rental payment history), the scoring systems that use trended data (including VantageScore 4.0 and FICO 10T) make it possible to score millions of consumers who would otherwise not be scored by conventional models.
Recently, the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac all announced that they would be implementing new credit scoring models for the first time in decades.
The two credit scoring models cited in the announcement, VantageScore 4.0 and FICO 10T, are notable for their use of trended data to create a more complete (and theoretically accurate) picture of a potential borrower's creditworthiness.
According to the creators of VantageScore 4.0, these new models will make it possible for more than 33 million American consumers, who would otherwise have insufficient credit histories to qualify for a score, to receive a credit score. And, as the joint FHA, Fannie, and Freddie announcement suggested, this change will open up access to federally-backed home loans for millions of families.
So how are these new credit scoring models different? And how can trended data help (or harm) your chances at getting a great rate on a loan or credit card? Here's what you need to know.
