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Vantage Score - What's
the Advantage?
Vantage score - what's the
advantage? The three major credit bureaus are introducing a new
credit scoring system to replace the old FICO score. The
Advantage Score will simplify credit-risk scoring which helps determine
what interest rate consumers will pay.
The new credit scoring
system being introduced by Equifax, Experian and TransUnion
will be made available to credit grantors such as banks,
credit card companies, mortgage lenders and auto dealers,
after which usage of the current FICO score system will
cease.
Currently FICO is the most popular
system used by credit grantors. Under the FICO system the three
credit bureaus between them hold the financial histories of millions
of Americans. From this data, the credit bureaus create a score
ranging from 300 up to 850, known as a FICO score.
How the Vantage is Scored
The credit bureaus claim
that under the new Vantage Score system, credit scores reported by
them to credit grantors will be consistent and easier to interpret.
Basically, the Vantage score system uses a scale that ranges from
501 to 990. TransUnion states that the new Avantage Score differs
somewhat (from the FICO score) in that it equates closely to the
letter-grading system used in schools. That's one reason,
apparently,
why it's easier to understand. For example, a Vantage score of 990
would equate to a grade A, 901-900 grade B, 701-800 grade C, 601-700
grade D AND 501-600 a grade F.
Effectively, therefore,
the Vantage score would eliminate many reasons why scores can vary so
much, a problem experienced by many consumers across the country.
In reality, however,
because the new Vantage score system still generates scores by using
information from consumer credit files, data relating to the
individual can still produce vastly different data. The problem,
therefore, is age-old in that one creditor may not report all of
your information to all three credit bureaus, or a file may be
missing critical data relating to the maximum limit on your credit
card.
How will Vantage Score Differ?
In short, however, it appears that the credit scoring system is still
broken. Instead of creating a new credit scoring system, the credit
bureaus should instead focus on fixing the problem of "reporting of
incorrect information", due to some critical data that may be
missing from your credit file. After all, misreporting on such a
grand scale can reduce your credit score no matter what the scoring
system.
What really needs to happen is that credit bureaus and
government should implement measures to ensure that data being
reported is as accurate as possible. In fact, you may be shocked to
discover there is no independent auditing to ensure data in credit
reports are accurate.
Finally,
don't expect the new Vantage Score to be radically different from
that of the old FICO scoring system. Whilst your actual score may
look different and be somewhat easier to understand, the credit
bureaus still haven't disclosed how they propose to rate credit
utilization (the amount you owe versus your high credit limit),
which under the FICO system accounts for 30% of your credit score.
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