The introduction of comprehensive credit reporting has raised many questions from credit providers and consumers alike. One of the most intriguing questions being how a person’s credit score is determined and the differences between the older style Veda 1.1 credit files and the new comprehensive version.
One significant difference we have noted between the two types of reports is they can carry different credit scores. That’s right, a person’s credit score can differ depending on the type of report. Confused? You’re not alone!
Differing Credit Scores
While conflicting credit scores may not be a problem if a person’s credit score is high, it could be a real issue if the persons score was marginal. Before I cover the possible ramifications of having conflicting credit scores, let me explain how this is possible.
Veda Advantage has recently introduced comprehensive credit reporting. These credit reports are more detailed than the older style Veda 1.1 reports which are still being offered, however Veda does intend to phase these out over time. Phasing out the older style reports does make sense, as more and more credit providers are turning to the new comprehensive reports as they contain more data which generally means better credit decisions.
One of the biggest changes between the older style reports and new comprehensive platform is the inclusion of a person’s repayment history. While not all credit providers are currently supplying repayment histories to Veda Advantage, I’m sure most will over time.
I’ve heard concerns that the inclusion of repayment histories in a credit report may lead to more people being declined for finance, as even if someone has no negative listings but has an inconsistent payment history, this may give a credit provider reason to question the application. While this is possible I see things in a more positive light. While displaying repayment histories in a credit file may lead to some credit providers forming a negative view of an application, it could also have the opposite effect.
Comprehensive Credit Reporting
Prior to comprehensive credit reporting only negative listings and enquiries were displayed; this gave credit providers very little information to base a decision on and given the conservative nature of most credit providers, this lack of information no doubt lead to credit declines.
With comprehensive reporting, both the good and the bad will be displayed. It is possible that a good repayment history may help offset a past negative credit listing and at least give an applicant a chance to secure the credit they seek. It’s early days and how this actually plays out is yet to be seen, however my view is more data in a credit file is a good thing.
Until the older style Veda credit reports are phased out a credit provider has the option to purchase either the older 1.1 credit report or the new style comprehensive report. As there is more data taken into account when determining a credit score with the new comprehensive reports, a person’s credit score can be different from one report to another.
This situation potentially means that an applicant could make two applications for the same item. Let’s say a credit card, and each credit provider could be looking at a different credit score and different credit scores could mean a different outcome.
We recently witnessed this with a client’s credit score being 93 points lower on their comprehensive report than their 1.1 report. You may say that 93 points is not a lot however what if the client’s credit score was marginal. Let’s say a credit provider triggered their automated credit systems to decline applications where the credit score was less than 700. Depending on which type of credit report the credit provider was viewing, this difference could be the difference between a decline and an approval.
It’s unclear how many credit providers are still relying on the older 1.1 Veda credit files, however I’m sure that not everyone has migrated to the newer reports so this situation could be happening regularly.
I’m sure Veda is well aware of this and they feel the issue is transitional, meaning it will be less of an issue as the older credit reports are phased out. However in the meantime, I wonder how many credit providers are viewing different credit scores for the same person?
John Dickinson