VantageScore
Will It Help Or Hurt Your Credit?

The vantagescore or vantage score will be sold through each of the 3 credit bureau agencies. The new system is designed to replace your FICO and credit score.

The new system is designed to provide better reports and more accurate data and covers a much more extensive consumer base, including the elusive thin credit file for many consumers who have little to no credit history with the 3 major credit bureaus.

VantageScore is also a direct challenge to the Fair Isaac Corporation's FICO score, which provides the most commonly used credit scoring system for mortgage lenders and other agencies.

Whereas the FICO score ranges from 300 to 850, with most Americans scoring between 670 and 700, the new system goes from 501 to 990, with each range being grouped by letter. Consumers with scores in the 900 and higher range would be grouped in the A range, while those in the 600 and below range would receive a grade of F.

The three major credit bureaus Experian, Equifax and TransUnion introduced the vantage score in March 2006 to compete and replace the current FICO system.

Just when it seemed consumers were getting a handle on how credit scores -- those 3 digit numbers that can determine your lending rate for cars, boats, credit cards, and mortgages -- were generated, the 3 major credit bureaus have introduced a new scoring system that shares data from all three agencies.

The system utilizes data culled from a sampling of millions of credit files reviewed by the three agencies, creating a single consistent system.

The 3 major credit bureaus say they have introduced this new system so that the numbers being reported to all credit grantors are consistent and easier to interpret.

To understand what this really means, you need to know that while we all get a number generated from each of the 3 major credit bureaus, how those are determined can vary greatly from credit bureau to credit bureau. That's because each bureau uses a different formula to generate the score it sells to lenders.

VantageScore Has One Big Thing Going For It!

It's easy for consumers to understand. Vantage Score is on a scale of 501 to 990. If your ratings are in the 900s, you have the equivalent of an A and you'll get favorable interest rates. If your rating is in the 800s, that's the credit equivalent of a B, with slightly less-favorable rates.

So let's say you're applying for a mortgage. The lender pulls all three of your credit scores from the three major credit bureaus.

You have a 775 from one bureau, 725 from another, and 675 from the third. To reconcile the different scores, a mortgage lender will typically use the middle score of 725 to decide what kind of interest rate it will give you (of course several other factors are also used).

The 3 major credit bureaus say they've introduced this new system so that the scores being reported to credit grantors are consistent and easier to interpret.

Will VantageScore Be Better For Consumers?

Some observers say that the new credit score model won't change the biggest problem consumers face when it comes to credit scoring -- inaccurate or incomplete data in their individual reports

It's not going to be useful to consumers if lenders don't use it, and lenders don't have much incentive to switch from the current system, which uses FICO.

Mortgage lenders have mountains of data that correlate FICO scores with default rates. Why would they abandon that?

To understand what that means, you need to know that while we all get a number generated from each credit bureau, how those scores are determined can vary greatly. That's because each bureau uses a different formula to generate the score it sells to lenders.

The Vantagescores under the new system could still cause a huge spread in scores. Credit scores are generated using information in your credit files. Each file can have all the same information or vastly different data.

One creditor may or may not report all your information to all three bureaus. Or one of your files might be missing the maximum limit on your credit card, making it appear as if you are overextended.

The new Vantage Score was just introduced last week, and adoption is gradually moving along. The 3 major credit bureaus plan to replace the proprietary scores at their Web sites with the new scores over the next few months, but right now they're focusing on marketing the score to lenders.

Selling Vantage Score To Consumers.

Experian expects to sell score to consumers in four to six weeks, while Equifax (EFX) says it will take six months to a year, and TransUnion said later this year.

According to the press statement, the Vantage Score system was developed by VantageScore Solutions, LLC, an independent company created and owned by the three major bureaus. Federal law prohibits the three bureaus from directly sharing data on consumer records.

The 3 major bureaus had previously agreed to create a data protection standard to make sure information transmitted from lenders and other businesses to the bureaus was not tampered with. Critics noted that this move also did not address the question of inaccurate data in the reports themselves.

The new vantagescore will range from a high of 990 -- a higher top end than most current models use -- to a low of 501.

VantageScore was developed using a national sample of anonymous credit information of approximately 15 million consumers and uses a score range of 990-501 and score groupings that approximate the familiar academic scale:

• 901-990 A
• 801-900 B
• 701-800 C
• 601-700 D
• 501-600 F

While the scale is slightly different, the rules for keeping your vantagescore high will remain the same: Pay your bills on time, don't tap into too much credit in a short time, and keep an eye on your debt-to-credit-limit ratio.

In general, if your outstanding revolving debt is 50% or more of the total credit available to you (all your limits added together), your score will take a hit.

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