Friday, March 31, 2006

Media Advisory: Free Teleconference on New VantageScore (SM) to Discuss Implications for Brokers and Borrowers

Media Advisory: Free Teleconference on New VantageScore (SM) to Discuss Implications for Brokers and Borrowers

Advantage Credit will host a free teleconference with a panel of mortgage industry experts on April 4, 2006.

Pensacola, FL (PRWEB) March 31, 2006 -- What: Advantage Credit, a top-10 mortgage credit reporting reseller, will host a free teleconference for its 18,000 mortgage broker customers and media regarding the announcement of VantageScore (SM), a new credit scoring model introduced unexpectedly two weeks ago by the three credit bureaus.

This event will provide the opportunity for a panel of industry experts to share their opinions on the new score and its possible effects on the mortgage business and consumers. When: The event will take place Tuesday, April 4th from 1 p.m. - 2 p.m. ET / 10 a.m. – 11 a.m. PT

Who: Ron Litt, president of Advantage Credit (formerly SVP at Allied Home Mortgage Capital Corp.) will be hosting and moderating the conference.

Panel Speakers:Representative from ExperianDan Jacobs, president, 1st MetropolitanRob Carter, senior VP of Amstar Mortgage More panel members to be announced

Why: The announcement of the new score by Experian, Equifax and TransUnion raises questions that have implications for everyone in the mortgage business. Many brokers are concerned about the announcement and what it means for their customers. The panel will address the expected level of acceptance into the industry, score consistency issues, pros and cons for borrowers and questions from the listeners via live e-mail.

To register for this free teleconference, call Amber Jackson for at 800-600-2510 ext.2471 or via e-mail at e-mail protected from spam bots.

Special Q & A OpportunityHave questions about VantageScore (SM) for our panel of experts?

Send them in advance to e-mail protected from spam bots.The teleconference capacity is limited so register now.

An audio file will be available online after the teleconference is held.

Advantage Credit: We do moreBackground:

About Advantage CreditAdvantage Credit International is the fifth largest credit reporting agency in the industry and is at theforefront of the fight against mortgage fraud. The company not only provides the easiest-to-read credit reports in the industry but also offers products and resources that save time, lower costs, close more loans and prevent fraud, doing more to aid loan officers. Advantage Credit serves more than 8,000 mortgage brokers and other customers nationwide through its customer-centric order and delivery site, Advantage Online and is a five-time Inc. 500 “Hall of Fame” winner.

Advantage Credit, founded in 1991, is a wholly owned subsidiary of The Adaugeo Group.Contact:Amber JacksonPR ManagerAdvantage Credit InternationalPh: 800-600-2510 ext. 2471

Tuesday, March 21, 2006

Get your 'new' credit score before you buy a loan

‘Today’ financial editor Jean Chatzky explains the new scoring process and offers tips on how to keep your score in good shape

By Jean Chatzky
“Today” financial editor
Updated: 7:46 a.m. ET March 20, 2006
The 'Today' show Financial Editor

Just when you thought you were starting to understand your credit score, the three credit bureaus are throwing a monkey wrench in the works.

Equifax, Experian and TransUnion recently announced that — working together — they are launching a new score called VantageScore. Available to credit grantors immediately and to consumers once creditors start using it, the program, according to a joint press release, is designed to "simplify the credit process for both consumers and credit grantors." They'll do this, the companies explained, by all using the same methodology — the same formula — to compute this one score.

That's not how it works today. Currently, consumers who want to learn their credit score can buy one from any of the three bureaus (which gather credit data) as well as from, the Web site of Fair, Isaac and Co. (FICO), the company that first turned credit data into the scores that lenders use to make their underwriting decisions.

Right now, the scores are all computed on a scale of roughly 300 to 850, but not all scores are the same. Your Equifax score is likely different from your Experian score which is likely different from your TransUnion score. All three bureaus use different formulas to compute their scores. But also because not all creditors report data to all bureaus. By using the same formula, VantageScore will solve the first problem, but not the second. Still, TransUnion Spokeswoman Colleen Tunney says: "We think variance in scores will be reduced by 30 percent.

The other problem the new score doesn't address is the issue of consumers having access to the same scores that lenders use. Right now, 75 percent of mortgage decisions are based on an actual FICO score; lenders buy them from Fair, Isaac. Logically, if you're going to be applying for a loan from one of these lenders and want to know what sort of rate you'll be able to qualify for, you should know your actual FICO score as well. That means buying one from or from Equifax, the only bureau to sell an actual FICO score.

The bureaus hope is that lenders will see that this new score is so predictive — that it does such a good job of showing which consumers are good risks and which ones are not so good — that they'll start to buy this one instead. If that happens, if VantageScore achieves critical mass, then it should be the one consumers ultimately turn to.

Until then, though, there will likely be another new score in the mix. And consumer advocates already believe it will be problematic. Why? The bureaus have introduced a new scale. Rather than sticking to the SAT-like score where anything close to 800 is a homerun, they've introduced a scale that starts at 501 and ends at 990.

They believe it should be easier to understand because it works like grades in a classroom. Anything from 900 to 990 is an A, which is excellent, anything from 800 to 899 is a B, which is pretty good and so on. Stephen Brobeck, executive director of the Consumer Federation of America, disagrees. "It's a terrible idea," Brobeck says. "At a time when consumers are just beginning to understand the traditional credit score scale, to change it radically will greatly increase consumer confusion."

For now, what should you do if you want to know what your credit score is? Go to or and buy one for $14.95, or — if you will be applying for a big loan like a mortgage in the next six months — buy all three for $44.84. (You don't want one low score to sink your chances of qualifying for a good rate on that loan; and it's tough to tell which score the lender will pull.)

Then, do your best to bring that score up by:
Paying your bills on time. Your credit score is numeric representation of how likely you are to be 90 days late to any of your creditors over the next 24 months. Every month you manage to keep your nose clean by paying your bills on time will make you look even less likely to be late in the future and send your score up.

Paying down debt. The percentage of credit available to you that you're actually using — called your "utilization ratio" weighs heavily in your score. Your score will be highest if you are using only about one-third. (Using more than two-thirds is a serious drain on your score.) If your ratio is hurting rather than helping, pay off some debt.

Focusing on credit cards you're closest to maxing out. The scoring companies look not only at how in debt you are overall, but how in debt you are on specific cards. Try to pay off those that are most maxed out first.

Not applying for new credit in the meantime. Every time you apply for new credit, you send your score down a little bit.

Jean Chatzky is an editor-at-large at Money magazine and serves as AOL's official Money Coach. She is the personal finance editor for NBC's "Today Show" and is also a columnist for Life magazine. She is the author of four books, including "Pay It Down! From Debt to Wealth on $10 a Day" (Portfolio, 2004). To find out more, visit her Web site,

Sunday, March 19, 2006



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Finally: New credit scoring system set

Finally: New credit scoring system set

March 15, 2006


Remember back in high school, when it seemed your whole life would be determined by your SAT score? Well, now there's a new score that will impact your entire life.

On Tuesday, the three largest credit bureaus -- Equifax, Experian and TransUnion -- announced they have created a new credit scoring system, "VantageScore," aimed at simplifying the loan process for both lenders and borrowers.

Credit bureaus are best known for compiling your credit report. The credit report merely reflects the information collected by the bureau from anyone who has granted you credit or who inquires about your credit.

Your credit score uses a proprietary modeling process, designed to weigh factors in your credit report -- such as the amount of debt you have outstanding and your history of prompt payments.


Personal finance experts say the biggest factor in a bad credit rating is poor payment history. Consumers who don't pay their bills or pay them late have lower credit ratings.

Beyond that, nothing else affects your credit score, including these four myths:

Myth 1: Checking your own credit will lower your score. Nope. Check all you want through the credit bureaus.

Myth 2: Your age, income and sex are factored into your score. Nope. Credit-industry experts say your place of employment is on a credit report, but even that doesn't affect the score itself.

Myth 3: The higher the salary, the higher the score. No again. And neither will winning the lottery. Pay off your debts. That will improve your score.

Myth 4: Credit scores are averaged when you marry. No. Your score is your score, and follows you like a shadow.

Credit scores have been around for a long time -- used by businesses to codify the information in your credit report and predict your creditworthiness. The best known name in the business has been the FICO score, so labeled because it was created by a pioneering company in the business, Fair Isaac Co.

But a variety of other credit scoring models have been used by both lenders and credit bureaus. The result has been a bewildering range of credit scores that showed wide discrepancies. Depending on which score was used, you might have been turned down for credit -- or required to pay a higher interest rate.

The solution -- jointly created by the credit scoring experts at all three credit bureaus -- is the new VantageScore that will range from 501 to 990. The higher the score, the more creditworthy the individual is deemed to be.

The VantageScore scoring system was created by taking information about a select, large group of consumers from all three credit bureaus at the same time to create a consistent, standardized scoring formula. It uses a new algorithm for modeling the factors that create the score, a process so unusual that the joint venture has applied for a patent on it.

The joint scoring formula will eliminate discrepancies as wide as 30 percent that currently exist in credit scores. But there still will be some disparities because the three major credit bureaus don't receive exactly the same information. Some credit grantors report your payment history to only one or two of the bureaus. Still, using the same scoring system should provide a lot more uniformity to the process.

Now the challenge is to get businesses to actually use this new VantageScore, rather than the other existing scoring models. It's expected that major credit grantors will quickly start evaluating the new score, comparing it to their existing models. If many agree to adopt VantageScore, that will benefit consumers in the long run.

Equifax says it'll wait until lenders accept this new score before marketing it to consumers. That's expected to take at least six months. But the financial institutions have been requesting a consistent, high-quality scoring model to aid them in their credit granting decisions, and they are certain to make this evaluation a priority.

Each bureau will market the VantageScore in its own way and set its own price. Federal law requires each bureau to give you one free credit report a year. (The easiest way to do that is to go to and click on the link to each bureau.) So the credit bureaus will use the new VantageScore, along with their credit monitoring services, as a source of revenue.

It's expected that the credit bureaus will bundle their own, or all three, credit reports, along with the new VantageScore, and possibly a subscription to their credit monitoring service for a fee to be determined. But again, that depends on how widely accepted the new VantageScore becomes.

Since so much of our lives are impacted by how we're viewed by credit grantors, we can applaud the three bureaus for their joint effort. It's time consumers knew the real score. And that's The Savage Truth.

Copyright © Terry Savage Productions

The "Official" Vantage Score FAQ

Why have the three companies collaborated to develop a score?

The three companies have heard client demand for the development of a single model that leverages the expertise of all three companies, and delivers the same, consistent and predictive power regardless of the data provider. The only way to address this market demand was to cooperate in the development of a revolutionary new score.

What are the advantages of this score over the many others currently on the market?

Developed simultaneously from consumer data across all three credit reporting companies, this score promises greater consistency and predictability. Leveraging the deep data understanding of all three companies, and the latest analytic techniques, make this score not only consistent, but more predictive than older models.

Who will be the main market for this new score- consumers or business clients?

VantageScore was created to address a strong need in the business marketplace. However, each company will distribute the VantageScore in a way that is consistent with its own business strategy that may include both consumers and business clients.

What does this mean for the continued existence of the credit scores the three companies have developed and marketed individually for the past few years? Will these scores continue to be sold?

This score provides a new and unique option to the marketplace. There will continue to be multiple scoring solutions in the market that meet business needs. VantageScore will compete on the merits of its consistent, predictive power.

Will each of you sell the same score? Will there be any variations from company to company?

The same model is used across all three companies. Differences in scores will occur when the underlying data content is different. Each company will sell VantageScore according to its unique marketing strategy and positioning in the marketplace.

How will this new score be priced?

As independent distributors of VantageScore, each company will set its own prices.

No Matter the Formula, Keep Credit Score High

Personal Finance

No Matter the Formula, Keep Credit Score High

Three reporting bureaus plan a simpler system as a rival to FICO. Regardless, knowing how to get a high rating and keep it is key.

March 19, 2006

The nation's big credit reporting agencies announced last week that they were launching a standardized credit score — with grades from A to F — to make it easier for both lenders and consumers to understand the often misunderstood ratings.

The new VantageScore from Equifax Inc., Experian and TransUnion is intended as an alternative — and competitor — to the three-digit FICO score calculated by Fair Isaac Corp.

But whether your credit score is expressed as a number or a letter, the most important thing is knowing how to establish a high rating, and keep it high.A good credit score makes it easier to get a loan, and can allow you to get credit at a lower cost. A top rating gives individuals access to the lowest-rate loans and the lowest fees, which can save thousands of dollars over time.

Fair Isaac, the nation's leader in credit scoring estimates that there's more than a 1.5% difference in mortgage rates for those at the top of the credit scale versus those near the middle. On a $200,000 mortgage, that difference costs a person with the lower score almost $200 a month — more than $71,000 over the life of a 30-year loan.

How are credit scores calculated and what determines your score? Equifax, Experian and TransUnion declined to detail the alchemy that goes into VantageScore.

It's likely, however, to be similar to what goes into the FICO scores, which range from 350 to 850.The formula for creating those scores works like this: FICO first sorts each person into one of 10 credit categories so that, for instance, people with "thin files" — not a lot of credit history — are compared only against other people with thin files. The formula then starts with a neutral score — about 600 points — and begins adding and subtracting points based on the activity shown in the file, said Craig Watts, a Fair Isaac spokesman.

Scores are based only on what is in the consumer's credit file — and that file can be different from one credit bureau to the next. So it's not uncommon for the same person to find that his or her FICO score at TransUnion is different from that at Experian or Equifax.

There are also some variations in the formula, based on which of the 10 categories a person falls into and which bureau is providing the report.Nonetheless, five factors account for the vast majority of any FICO credit score.

• Thirty-five percent of your credit score is based on how you have repaid your credit obligations. Points are added for people who always pay their bills on time; points are subtracted for those with some late payments, non-payments, "restructured" payments — when the creditor agrees to take less than what's owed — and bankruptcies.

The more credit that you have used, and paid consistently, the better your score. Naturally, the most serious credit faux pas take away the most points — a bankruptcy is going to harm your score much more than a few 30-day late payments.

• Thirty percent of a score is based on your debt-to-available-credit ratio. The lower that ratio, the higher your score.For instance, if you have a $100,000 home equity line and four credit cards, each with $5,000 limits, your total available credit is $120,000. If you've borrowed a total of $5,000 on the credit cards and $10,000 on the home equity line, your debt amounts to $15,000, or 13% of your available credit.If, however, you have just $20,000 in available credit and have borrowed $15,000, you have a 75% debt-to-available-credit ratio. That makes you look overextended and will result in a much lower credit score.

Moral of this story: Consolidating your debt onto one or two cards and canceling the unused cards could hurt your score by reducing the amount of credit you have available and, thus, boosting your ratio. Unless there's a compelling reason to cancel — such as having to pay annual fees to hold those unused cards — don't.

• Fifteen percent of your score is based on the amount of time you've managed credit. If your credit file lists experiences, from student loans to credit cards, that go back decades, you'll score better than somebody whose oldest credit experience was what was reported last month.• Ten percent of your score is based on how many different types of credit you have handled in the past. Someone who successfully paid a mortgage, a home equity loan, a car loan and credit cards will score higher than someone who has one type of loan.

The good news: Repaid debts usually remain on your file for many years, Watts said. So you don't get penalized for responsible behavior such as paying off your car loan, he said.

• The final 10% of your score is based on new credit applications and consumer-initiated credit "queries." Each time you apply for credit, a credit query hits your file. If you have a lot of those inquiries in a short period of time, this portion of your score suffers, Watts said. That's because people who apply for vast amounts of credit in a short stretch are eight times as likely to file for bankruptcy, he said.

Trio of Agencies Create New Credit Scoring

New York (March 15, 2006) - Three consumer credit reporting agencies announced that they have created a new credit scoring system to simplify the loan process for lenders and borrowers.

The Equifax, Experian and TransUnion agencies said their new VantageScore system has grown out of the market's demand for a more objective approach to scoring. Agencies have each used their own formulas to create scores in the past.

In a statement, the agencies said VantageScore "will provide consumers and businesses with a highly predictive, consistent score that is easy to understand and apply."

The new scores, will range from 501 to 990, are already available to financial institutions and will be rolled out for consumers later in the year. Experian said the new scores will be grouped on the familiar academic scale, with an "A" being given to scores in the 901 to 990 range and an "F" being given to scores in the 501 to 600 range.

VantageScore is being independently marketed and sold separately through each of the three national credit reporting companies via licensing agreements with VantageScore Solutions LLC, which is jointly owned by the three credit bureaus. An informational Web site can be accessed at

— WebCPA staff

Giving Credit Where Credit Is Due

Giving Credit Where Credit Is Due

Three credit bureaus band together to rival Fair Isaac's FICO scoring system. If VantageScore is more accurate, will lenders change their ways?

It's the multibillion-dollar question that every credit-card company, auto lender, and mortgage outfit wants to know: If they lend you money, will you pay it back? Fair Isaac -- creator of the famous FICO score -- is the company that answers that question most often today. But on Mar. 14, the Big Three credit-reporting companies unveiled what had been a tightly guarded secret plan to knock Fair Isaac from its throne and become the dominant provider of credit scores to lenders. For most borrowers, this is a good thing. More intense competition will force everyone in the credit-scoring business to assess default risk as accurately as possible (see BW, 11/28/05, "Anatomy of a Credit Score"). Creditworthy people who were unfairly lumped in with deadbeats are more likely to get credit now, and at lower rates. Of course, poor risks who were accidentally given loans are more likely to be rejected if accuracy improves. On the whole, though, lenders will tend to make more loans, at lower rates, if they have increased confidence in the accuracy of credit scores. SETTING STANDARDS.

VantageScore was announced jointly by the top credit-reporting giants: Equifax (EFX ), Experian, and TransUnion. Scores will range from a sterling 990 down to a bankrupt 501. In contrast, FICO scores range from 850 to 300. As a gimmick, VantageScore may also be reported as a letter grade -- from A through D, and F. To create VantageScore and better compete with Fair Isaac (FIC ), the three rival credit bureaus set aside their differences and started from scratch, using raw data on millions of people in their databases.

They devised a standard way to categorize borrowers, as well as a standard recipe to determine creditworthiness. The bureaus won't share data. Instead, each will use the recipe on its own data to produce a credit score. The only source of difference between bureaus' VantageScore results will be the raw data -- such as missing or inaccurate information -- not scoring methodology. Until now, the three bureaus offered their homegrown credit scores for sale to lenders but didn't get as many takers as they'd hoped, because many lenders preferred FICO scores.

Experian and Trans Union also sold their scores directly to consumers. It has been highly frustrating to lenders -- and to borrowers -- that the same person could get drastically different credit scores from different bureaus. SUBPRIME MARKETING. On the bright side, the companies say that using VantageScore reduces by about 30% the wide "dispersion" in scores that the different bureaus generate. On the not-so-bright side, that means that 70% of the dispersion remains.

That's because VantageScore can't overcome the problem of incomplete or inaccurate information. "Garbage in, garbage out," says Greg Fisher of Dayton, Ohio, who runs two Web sites on the subject, and

While acknowledging that VantageScore isn't perfect, its authors say their tests show it makes better predictions about loan applicants who have "thin files," such as young people with no credit history. It should also help lenders better segment less creditworthy "subprime" borrowers, so they can figure out which ones to market to and which to stay away from, says Dana Wiklund, senior vice-president for predictive sciences at Equifax (see BW Online, 9/14/05, "Subprime Lenders Bear Scrutiny").

While it may not matter much to consumers, a big issue for the industry is how VantageScore will fare against Fair Isaac.

The Big Three say they haven't yet measured its performance vs. FICO. Fair Isaac, with revenues of nearly $800 million last year, says it counts 99 of the top 100 U.S. banks as clients. However, investors see a challenge. Fair Isaac shares fell nearly 7% on the news of the competing system. ANTITRUST CONCERNS?

Fair Isaac Chief Executive Tom Grudnowski said in an interview that FICO scores are deeply embedded in the way lenders evaluate loan applications. The biggest challenge for the credit bureaus, he says, will be to prove that their score is so much better that it justifies ripping up the way they do things now. Says Grudnowski: "There's got to be a really compelling reason to convince an institution to change."

There's also the question of whether the close collaboration between three industry rivals could be perceived by antitrust regulators as an attempt to squelch competition and raise prices. A Justice Dept. spokeswoman on Tuesday said the department would have no immediate comment. A Federal Trade Commission spokesman did not immediately return a phone call. Only time will tell how they rate VantageScore.

Credit Bureaus Join To Remake Scoring

Credit Bureaus Join To Remake ScoringSystem Employs Letters, New Scale

By Caroline E. MayerWashington Post Staff WriterWednesday, March 15, 2006; D01
The nation's three largest credit bureaus yesterday unveiled a new credit scoring system that they say will make it easier for lenders to determine a borrower's credit risk and for consumers to more accurately gauge their financial health.

In a rare cooperative venture, Equifax Inc., Experian Information Solutions Inc. and TransUnion LLC designed the new system, called VantageScore, to simplify the credit-application process by providing an easy-to-understand, consistent score among the three firms. They say the score will better predict whether a consumer will make timely payments over the life of a loan.

However, the three credit bureaus released so few details about VantageScore that industry officials and consumer activists said that the credit-application process could become more confusing for consumers, certainly in the short-term and possibly longer.

VantageScore will compete with FICO, the scoring system created by Fair Isaac Corp. and used in about 75 percent of all mortgage applications. It will use a different set of calculations to produce scores, ranging from 501 to 990; the FICO scale goes from 300 to 850.

Although the credit bureaus are starting to sell VantageScore to lenders, the new scores won't be available to consumers for at least several weeks. Consumers can continue getting the individual credit-bureau scores as well as FICO scores. The latter vary widely among the credit bureaus, a common complaint that led to the creation of VantageScore.

The new scoring system will not be valuable to consumers "unless the credit grantor adopts and uses it," said Paul J. Springman, chief marketing officer for Equifax. He said his firm would switch as soon as lenders accept the new system. "That will take more than six months," he said.

Experian said it hoped to offer the new score to consumers within eight weeks, while TransUnion said it would do so later this year.

Virtually no loan is granted today without a credit score -- a three-digit number based on payment history, outstanding debt, and the number and type of accounts. Lenders say these scores treat applicants more objectively and speed up the approval process, which is critical in today's credit-based economy.

The higher the score, the better the credit risk -- and the lower the interest rate to be charged. For FICO, most people score in the 600s and 700s, and anything above 700 is considered very good financial health. Under VantageScore, anything above 900 is considered an A; from 800 to 900 is a B and so on.

The different scoring scale might confuse consumers, who are still getting used to the FICO system, said Stephen Brobeck, executive director of the Consumer Federation of America. "This is complicated enough without a second scale," he said.

The credit bureaus said they developed VantageScore after lenders requested a more accurate system, one in which scores did not vary widely among credit bureaus. The score will be independently marketed and sold by each bureau through licensing agreements with VantageScore Solutions LLC, which is jointly owned by the three companies.

Although the new mathematical formula used to come up with the score is intended to reduce the variation, there will still be differences because each company collects data differently. Since some accounts may be listed at one bureau but not the other, a consumer may still get different scores from each firm.

"It doesn't address the larger issue of how accurate are the files," said Gail Hillebrand, a senior attorney with Consumers Union.

VantageScore represents an attempt by the credit bureaus "to develop a better mousetrap, to put more money in their pocket and prevent more from going out of it," to rival FICO, said Greg McBride, senior financial analyst for Bankrate Inc., whose Web site aggregates financial rate information.

Ron Totaro, vice president of Fair Isaac's Global Scoring Solutions said the 17-year-old FICO score is "pretty ingrained and encoded in computer systems" of lenders, which will make it hard for financial institutions to switch. "It's very difficult to come up with a better mousetrap," he added.

Douglas G. Duncan, chief economist for the Mortgage Bankers Association, said VantageScore's success will depend on accuracy, price and product efficiency.

McBride said that with the dueling systems, banks will become much "like high school seniors deciding which college-entrance exam to take, the ACT or SAT."

© 2006 The Washington Post Company

Agencies Adopt New Credit Scoring System

Agencies Adopt New Credit Scoring System


(AP) - NEW YORK-The nation's three major consumer credit bureaus have created a new credit scoring system designed to make it easier for financial institutions to evaluate loan applications and to give consumers a better way of measuring their financial health.
The credit reporting agencies - Equifax, Experian and TransUnion - announced Tuesday that they're introducing "VantageScore" to banks, mortgage lenders and credit card companies immediately. The new scores will be available to consumers after the lender rollout, probably later this year.

"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."

Credit scores traditionally have been three-digit numbers that lenders used to evaluate the creditworthiness of borrowers. The scores reflect how much debt a consumer is carrying, how good they've been at paying back loans and how many credit applications they have outstanding.

They're important because lenders use them to determine if they'll loan money to consumers and at what rate. The higher the score, the more creditworthy the consumer is considered and the lower the interest rate the consumer will be charged.

The agencies in the past each used their own proprietary formulas to generate their own scores, meaning that a lender dealing with a consumer's application for a credit card or a mortgage might have to reconcile three widely different scores.

With the new system, a single methodology will be used to create the scores for all three credit bureaus, the agencies said.

As a result, scores will be "virtually the same across all three of the national credit reporting companies," said Experian spokesman Donald Girard. Any difference in the scores provided by each agency will reflect differences in the data they've collected in consumers' files, he said.
The credit reporting agencies said in their announcement that VantageScore "will provide consumers and businesses with a highly predictive, consistent score that is easy to understand and apply."

Consumer advocacy groups expressed concern that the new scoring system would not eliminate one of the biggest problems in the industry which is incorrect information in consumers' credit files.

"That means it's a new recipe, but the same old ingredients," said Jean Ann Fox, director of consumer protection with the nonprofit Consumer Federation of America in Washington, D.C. "It doesn't address the underlying accuracy of the credit reports on which the scores are based."
In addition to the credit agency scores, some large lenders generate their own internal scores, often using credit bureau data. And many lenders, especially those in the mortgage business, use FICO scores, which are named for the Minneapolis-based Fair, Isaac Corp. that developed them.

Thomas G. Grudnowski, the chief executive officer of Fair, Isaac, said that "for the past 20 years, we've been both cooperating and competing with the credit bureaus ... and that will continue." He added that it could take a long time to establish a competing system.
"Do the customers ... really want to go through the pain of converting to another system?" he asked. "I think only time will tell."

Dana Wiklund, senior vice president for predictive sciences at Equifax, said that VantageScore "is a new, competitive product to give lenders greater choice, and hopefully greater accuracy, in credit scoring." He added: "The rate of adoption will determine ultimately if the (new) score replaces any in-house or generic scores in the market."

Executives at the credit agencies said that the bureaus did not need to consult with federal regulators before developing their new scoring process. But a number of executives, including Wiklund, traveled to Washington, D.C., on Monday to brief bank, savings bank and credit union regulators on the new scoring process.

"The role of the regulators is to look at the safety and soundness of the institutions they oversee," Wiklund said. "They're very keenly interested so that models don't have disparate impact ... on low income vs. high income individuals, minority vs. non-minority, that kind of thing."

VantageScore ratings will range from 501 to 990. The top end is slightly higher than scores currently in use.

In a separate statement, Experian said the new scores will be grouped on "the familiar academic scale." Experian gave these groupings, with A and B being the best potential borrowers and D and F being the weakest:

A - 901-990
B - 801-900
C - 701-800
D - 601-700
F - 501-600

Colleen Tunney, spokeswoman for TransUnion, told a conference call with reporters and credit industry representatives that the new score was created by looking at millions of consumer files at the same time to ensure consistent readings across the three bureaus' data.

David Rubinger, spokesman for Equifax, said the new score was expected to reduce the variance in a consumer's scores by about 30 percent compared with what it was under the old system.
He said the score would reflect a consumer's frequency of borrowing, delinquency in paying bills and other "file content." But Rubinger and other credit bureau spokesmen said it was too soon to provide the specific weights for the components.

VantageScore is being independently marketed and sold separately through each of the three national credit reporting companies through licensing agreements with VantageScore Solutions LLC, the joint announcement said. The spokesmen said that VantageScore was jointly owned by the three credit bureaus. They said it did not yet have a headquarters, although an informational Web site had been set up at

The credit reporting agencies are operated by Equifax Inc. of Atlanta, Experian Information Solutions Inc. of Costa Mesa, Calif., and TransUnion LLC of Chicago.