VantageScore

"A Good Credit Score? Check Your VantageScore..."

Big news on credit score reports from the three major consumer credit bureaus. 

.........Finally, they have gotten together and created a new consumer credit scoring system called "VantageScore".

It will make it easier for financial institutions to evaluate loan applications and the new system will give consumers a better way of measuring their personal credit score and financial condition.
 
Equifax, Experian and TransUnion acknowledged that there was a need for a consistent credit scoring model that would work with the data that was compiled by all three reporting agencies.

The new "VantageScore" system will provide consumers with a consistent score that they can understand and use for their own financial needs.

Credit Score Reports

Lenders and credit card companies have access to VantageScore now and consumers will be able to get a report and credit score in a few months.
   
Credit scores are three-digit numbers that lenders used to evaluate the creditworthiness of borrowers. The scores make it easier for lenders to determine the risk they face with an individual borrower.  It is an indication of how much debt a borrower has and how good they've been at paying back loans.

 The personal credit score not only is a factor in whether the consumer will be the loan, but also at what interest rate they will be paying.  The higher the score the more likely you will get the loan and at the best rate.

The credit reporting agencies said in their announcement that VantageScore will provide consumers and businesses with a highly predictive, consistent score that is easy to understand and apply."

In prior years the credit bureaus used their own individual formulas to generate their own credit scores.  That was a hassle for lenders, because as they gathered credit information about a borrower they had to reconcile three widely different scores.  The new system cranks out scores that are all based on the same formulas. The scores will be virtually the same across all three of the credit reporting companies.

There may be minor differences in the scores, but they will just reflect differences in the data  collected by each company.  There is still the chance that a particular reporting company could have incorrect information in consumers' credit files.

VantageScore is certainly a step forward in credit reporting, but doesn't address the underlying accuracy of the credit reports on which the scores are based.  In other words, garbage in - garbage out!

Credit Scores FICO

The credit agencies are not the only one generating credit scores.  Some large lenders generate their own internal scores, often using credit bureau data. 

The old standby in the mortgage business has been FICO scores.  It's a company by the name of Fair, Isaac that gathers information from the credit reporting companies and compiles a numbered FICO score. An executive of Fair, Isaac has been quoted as saying, "It could take a  long time to establish this competing system."

Understanding Credit Score

VantageScore ratings will range from 501 to 990. The top end is slightly higher than scores currently in use.

Experian announced that the new scores will be grouped on "the familiar academic scale." Experian points out these groupings, with A and B being the best potential borrowers and D and F being the weakest:

A -- 901-990

B -- 801-900

C -- 701-800

D -- 601-700

F -- 501-600

Any number below 600 will be considered a bad credit score.

The score will reflect a consumer's frequency of borrowing, delinquency in paying bills and other "file content." Credit bureau spokesmen said it was too soon to provide the specific weights for the components.

VantageScore is being marketed and sold through each of the three national credit reporting companies through licensing agreements with VantageScore Solutions LLC.  

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