Several years ago, the credit reporting companies (CRCs) began maintaining a 24-month chronology of your monthly credit card statement information, including your balance, credit limit and the actual amount you paid. This collection of information is now commonly referred to as trended credit data, as it can be used to determine the trends of your credit card terms and usage. And in April 2017, VantageScore Solutions announced that its VantageScore 4.0 credit score model will consider this trended credit data when calculating your credit score.
Before the three national CRCs began maintaining trended credit data, there was no way to rely on a credit report to identify your balances or credit limits in the months prior to the most recent update by your credit card issuers. Broadly speaking, trended credit data tracks the trajectory of a person’s credit behaviors and relies less on a consumer’s behavior reported in any given month. As a result, scores will become more accurate and consumers will be better served.
Now that the data is readily available, there are several innovative ways to use the information in a credit scoring model. The following provides some guidance for consumers about how this data may be used in the calculation of their credit scores:
Historic Aggregate Utilization — Aggregate utilization is one of the most valuable credit scoring metrics and has been for decades. The metric is calculated by dividing the aggregate of your credit card balances by your total credit limit amount. The higher the percentage, the more problematic for your scores. Now, because of the availability of historic balances and credit limits, it’s relatively simple to calculate aggregate utilization for the previous 24 months. Because utilization is so valuable, there’s no reason to believe that the measure of historic utilization wouldn’t be. Now it’s easy to see if you’re reducing your utilization, increasing utilization or remaining stable.
History of Heavily Leveraging Individual Credit Cards — Prior to trended credit data, there was no way to know if someone maxed out or otherwise heavily leveraged individual credit cards during the prior 24 months. Trended credit data has changed that. If someone makes it a habit to run up large balances, perhaps 50% or more of their credit limits on one or more of their credit cards, this is now easily identified and can be considered in credit scoring systems.
History of Payments Above the Minimum Amount Due — It stands to reason that someone who is paying the minimum amount due on a debt represents a greater risk than someone who is paying a significantly higher amount than the minimum payment due. Practically speaking, the person paying more is likely to have greater resources he or she can expend toward paying down that debt. Trended credit data allows credit scoring models to reward those individuals with additional points.
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