Three major credit bureaus release new credit scoring system…
On 14 March 2006, the three major consumer credit bureaus collaborated to release their jointly developed credit-scoring product, called ‘VantageScore’. Equifax, Experian and TransUnion introduced this new credit scoring system in hopes of replacing the widely accepted FICO score, provided by Fair Isaac.
The new system is designed to provide consistency across all three credit bureaus and simplify the credit scoring process. Utilizing a patent-pending analytic methodology that compares the differences between all three credit agency files, it will deliver a predictable and consistent score– which is easy to understand. The new credit scoring system ranges in scale from 501 to 990 (vs. 300 to 850) which corresponds to a letter grade of A, B, C, D, and F. The higher the score the lower the risk.
VantageScore will work as follows:
901 – 990 = A
801 – 900 = B
701 – 800 = C
601 – 700 = D
501 – 600 = F
Consumers will be able to buy their VantageScore from Equifax, Experian and TransUnion in a few months. But the success of VantageScore depends on lenders’ willingness to accept the new system. Many don’t believe it will be a quick process– if they accept the new system at all.
Officials at Fair Isaac agree. The “vast majority” of large lenders now use Fair Isaac’s FICO score, notes Ron Totaro, a vice president at Fair Isaac. FICO’s system is “ingrained” in lenders’ computers, and they’re unlikely to replace it with VantageScore anytime soon.
Credit bureau officials say VantageScore will be easier for consumers to understand because it will use letter grades to rate creditworthiness. But only time will tell if they can sell the new product to the general public and the credit industry as a whole.
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