Provides information and tips about the new credit scoring system that will be used by creditors and the three major credit bureaus in addition to the FICO score.
Janet just got her free credit report for the year. She was happy with what she saw on the report. She decided to get her FICO score, and to her surprise, it had gone up by more than 80 points since the last time she got a credit report, which was over a year ago. She had worked hard all year to pay off her credit cards, and the good news on her credit report made her happy. Janet was so happy that she had finally figured out how to improve her FICO score and credit report. Unfortunately, as soon as she saw her great credit report and FICO score, she read about a new credit scoring system that was going to start soon. She thought, "I can't believe it!" I worked really hard to get a better score, and now they give me this!
Just when you thought you knew how to get your FICO score and how to understand it, the whole system is about to change. The three credit bureaus have decided to do things backwards and have worked together to make a new way to score people's credit. The name of it is the VantageScore.
Why did Experian, Equifax, and TransUnion decide to come up with a new way to score people's credit? They say that the new scoring system will make it less likely for your scores from the three bureaus to be different. These agencies say that the VantageScore gives more accurate scores to people who may not have a long credit history.
Are the ranges for my VantageScore and my FICO score the same? No. The range of the VantageScore will be from 501 to 990. For example, a score between 901 and 990 is an A, 801 to 900 is a B, and 501 to 600 is an F.
The range of the FICO credit score system is from 300 to 850. It looks like the VantageScore system might be more strict than the FICO score. For example, if you have a FICO score of 720, you might be able to get a credit card with an interest rate of 9%. With the VantageScore, your interest rate on this same credit card could be as high as 20%.
On March 14, 2006, the VantageScore could be used in business. How well this system works for both lenders and borrowers will become clear over time. Since the VantageScore ranges for getting a good interest rate are much higher, it looks like the new scoring system may be better for lenders than for consumers. This seems to mean that creditors will be able to charge customers more for goods and services.
Make sure you know about the new VantageScore system and how it will affect you as a consumer. Even though your creditor can still use the FICO scoring system, they can choose which system they will use to look at your credit. There are now two systems in place. No one knows for sure how long the FICO system will be around.
