Vantagescore credit score system? Will it replace your FICO credit scores? Learn how to improve your credit score under the new vantage score system.
This system is based on an easy to understand letter grade scale, with scores ranging from 501 to 990, the higher the vantage score the better.
A score of 901 to 990 equates to a grade of A, 801 to 900 equals a B, and so on down to 501 to 600, which is an F. The score can vary a bit based on each of your credit reports, so it's still important to check out all three reports for errors twice a year.
The credit bureaus say they've introduced the new system so that the scores being reported to credit granters are consistent and easier to interpret.
To understand what that means, you need to know that while we all get a score generated from each 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.
So let's say you're applying for a home mortgage. The lender pulls all three of your FICO scores from the three major credit bureaus. You have a 750 from one bureau, 700 from another, and 675 from the third. To reconcile the different scores, a mortgage lender will typically use the middle score of 700 to decide what kind of interest rate it will give you (other factors are also still used).
The new Scoring system, is designed to provide better reports and more accurate data about you, and covers a much more extensive consumer base than currently used, including the elusive - thin credit file - for consumers who have built up little to no credit history.
The system utilizes data culled from a sampling of millions of credit files reviewed by the three agencies, creating a single consistent score.
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:
The Fair Isaac Corporation's FICO score, which provides the most commonly used credit scoring for mortgage lenders and other agencies has been used for years.
The FICO score has, until now, been the model for the three bureaus -- Equifax, Experian, and Trans Union -- to directly gauge customer credit worthiness.
According to a company press release, the new Vantage Score would provide far less variation than the proprietary scores now used by some of the major bureaus.
The FICO score model grades consumers' credit ratings based on factors such as debt-to-income ratio, credit usage and history, bad credit items, and so on.
Mortgage lenders have mountains of data that correlate FICO scores with default rates. Why would they abandon that for this new system? Most Lenders are waiting to see how well this new system works.
Experian expects to sell The 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.
While the scale is slightly different, the rules for keeping your score 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 credit limits added together), your score will take a hit.
According to the press statement, the scoring system was developed by Vantagescore Solutions, LLC, an independent company created and owned by the three major bureaus.
Vantage Score can be seen as a direct challenge to the Fair Isaac Corporation's FICO score, which provides the most commonly used credit scoring for mortgage lenders and other agencies.
The new Vantage Score will range from a high of 990 -- a higher top end than most current models use -- to a low of 501. Today, you will have the knowledge and power in your hands to change your life financially!
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Disclosure: I am an independent Credit Repair Cloud™ Affiliate, not an employee. I receive referral payments from Credit Repair Cloud. The opinions expressed here are my own and are not official statements of Credit Repair Cloud.