May 2006
Do you need this new credit score?
Credit bureaus tout their new VantageScore
| By now you may have heard that the three major credit bureaus--Equifax, Experian, and TransUnion--are introducing a new credit-risk
scoring system that is dubbed VantageScore. The credit bureaus say this new system will result in credit scores that are more
consistent and easier to interpret. Currently, each bureau uses a different formula to create a credit score. As a result, your consumer credit score at all three bureaus could vary by as much as 50 points on a scale from roughly 850 to 300. To make your scores consistent, the three bureaus say, they have come up with one formula that they will all use to calculate your VantageScore. Experian and TransUnion also say it will be easier for you to grasp how good or bad your VantageScore is, since the new system will be similar to a school-grading system. VantageScore will run from 990 to 501. If you rate a score in the 900s, your credit rating earns an "A"; a score in the 800s is a "B" and so on. For the new system to work, credit lenders--such as auto dealers, banks, credit-card companies, and mortgage lenders--will have to modify their systems. Whether or not they make the change remains to be seen. Experian says 250 lenders are currently testing the new system but no one has signed up yet. And lenders have been reluctant to make such a change in the past. When FICO introduced an update of its own scoring system in 1999, called NextGen FICO, most creditors stuck with Classic FICO. A representative from Fair Isaac told us that the company is confident that lenders will continue to use its FICO scores. The new scoring system fails to fix one big problem, however. Although each bureau will use the same algorithm, your VantageScore could vary. The new scores will still be based on the content of your credit record at each bureau, and each file may contain different information. Not all creditors report to all three bureaus, for example. If any of your credit reports have incorrect information or are missing critical information, your score could be higher or lower. So far the bureaus have not made VantageScore available to consumers. You won't be able to find out what grade you earn from Experian until sometime this summer. TransUnion says VantageScore will be available to consumers later in 2006, and Equifax says they won't offer it to consumers until lenders adopt it. When your VantageScore does become available, you'll be able to go to the three bureaus' Web sites (www.equifax.com, www.experian.com, www.transunion.com) and, for a price, get your score. Experian says it will probably charge about the same price it now does for its credit score (around $6). Naturally, the bureaus will also bundle your score with a host of other options they'll charge you for, such as the ability to monitor your report on a daily basis--something Consumer Reports thinks is unnecessary. The bottom line. There's no reason to pay for a score that no one is using. Only pay to see your VantageScore if you hear that major banks and credit-card issuers have adopted it. If it proves as unpopular as NextGen FICO, your old FICO score will be the only one you need to check. |
