There is a new credit scoring system in town. It's called Vantage Score and will make understanding your credit score as easy as understanding your report card was in high school.

At least that's the plan. The three major credit agencies, Experian, Equifax, and Trans Union announced on March 14, 2006 that they would be adopting the new system and rolling it out to banks, mortgage lenders and credit card companies immediately.

"There's clearly been a need out there to have a consistent scoring model that works across all three reporting agencies' data," said Kerry Williams, group president of Experian's credit services division. "And consumers need a consistent score that they can understand and use in their own financial lives."

It was developed as a joint project between the three agencies and marks the first time the three have used the same scoring system. In the past even if all three agencies had collected exactly the same data, the scores each arrived at could vary significantly. This is because each used it's own proprietary scoring model, developed internally.

With Vantage Score each will use the same method to arrive at a score. This means that any variance will be due to different data being collected. Many consumers are unaware that not all businesses report credit issues to all three bureaus, just as not every business pulls credit reports that merge the three agencies into one report.

Virtually every mortgage lender looks at all three scores and makes its decisions based on the middle score. It is important to note that it is the middle score not the average of the three that becomes your effective score in the mortgage industry.

Under the old system scores range from 350 - 850, with higher scores meaning a higher level of creditworthiness.

With Vantage Score higher scores still mean more creditworthiness, what is different is that there will

also be a letter grade assigned. The new range is from 501 - 990 and the grades will be as follows:

901 -990 = A

801 - 900 = B

701 - 800 = C

601 - 700 = D

501 - 600 = F

While this new system may seem simpler at first several consumer advocacy groups have expressed concern regarding the accuracy of data gathered. Citing the old 'Garbage In, Garbage Out' adage, and expressing concerns over the accuracy of the data more than the scoring system itself.

The old system will still be around and in use while it is unclear how much the new system will be adopted.

What will remain true is what it takes to establish and maintain good credit scores under either system. Do not carry too much debt, pay your bills on time and avoid excessive credit inquiries.

Steve can be reached at steves@viewpointfinance.com and (909)238-3787

Tell Your Friend