The New Credit Score That Rewards You for Paying More Than the Minimum

TransUnion, one of the three major credit reporting agencies, has made several changes in the last few years to the credit reports it provides consumers, in addition to developing a new credit score to help lenders better evaluate potential borrowers.

If you’ve requested your TransUnion credit report recently (you get free credit reports every year through AnnualCreditReport.com), you may have noticed there are a lot of details in it about how you manage your account. The new report format — part of their new CreditVision suite of tools — includes up to 30 months of account history and 82 months of payment performance data. The CreditVision New Account Risk Score uses all that data to generate scores ranging from 300 to 850. About 26.5 million consumers who are not scoreable using what TransUnion calls “traditional scoring models” have CreditVision scores, and 3 million of them fall into the prime or super prime categories, aka good or excellent credit.

These figures come from an internal analysis of TransUnion consumer credit files, in which the same reports were used to generate a CreditVision New Account Risk Score and a VantageScore 1.0. More than 23 million U.S. consumers would have super prime credit scores under the new model, because the score takes a more detailed look at the data, the credit bureau claims.

What’s New?

Charlie Wise, vice president in TransUnion’s Innovative Solutions Group, explained it as a difference between what he called static credit report data and dynamic credit report data. Here’s what that difference means:

When a potential lender (or you) requests your credit report or credit score, the result is a snapshot of your accounts as your creditors most recently reported them to credit bureaus, potentially including credit card balances, loan status, whether or not you’ve made payments on time, collection accounts and any number of other things that are reported to credit bureaus.

By comparison, there are more details in the CreditVision history. CreditVision data includes more than if you paid your credit card bill on time, it includes how much you paid; rather than just seeing your current balances, a potential lender can see whether the balances are growing or if you’re paying them down. They can see if you make minimum payments, pay the full statement balance or pay something in between. These data points — if your lender furnishes them to TransUnion, which it may not as this is a pretty new feature — show trends that may be more helpful in a lender’s decision-making process than merely looking at your account balances at a single moment in time.

That’s the idea, anyway — that more specific data can help lenders understand you better as a potential borrower by looking at your spending and payment patterns. Generally, you want to use less than 30% of your available credit. Traditional scoring models don’t specifically factor in whether you pay the balance in full or not, rather, they focus on what percentage of your available credit you’re using and if you’re paying on time. With the CreditVision score, showing your ability to regularly pay a large balance may lessen the impact of using a high percentage of your available credit. That could have a serious impact on the credit score of someone who spends within their means but has low-limit credit cards.

“If you’re a transactor and you spend it a lot but pay it all, that’s low-risk behavior,” Wise said. “I do want to emphasize that the old rules, in terms of guidelines of what constitutes good behavior or low-risk behavior, are still true.”

Keep in mind that lenders are generally slow to adopt new scoring models, and there’s no way to know what model a lender uses for risk assessment, though TransUnion said some small- and mid-size regional lenders have already started using CreditVision.

Given how many models there are out there (hundreds), the important thing to focus on is practicing the basics: Pay your bills on time, keep your debt levels low and apply for new credit sparingly. You should also keep an eye on how your credit standing fluctuates, which you can do for free on Credit.com. The regular checkups are important, because your score will certainly change over time.