Standardized Credit Score Is Unveiled

Standardized Credit Score Is Unveiled

(March 15, 2006) -- In an effort to make it easier for lenders and borrowers to understand consumer credit scores, the three biggest U.S. credit-reporting firms — Equifax Inc., Experian, and TransUnion — have banded together to standardize the method of calculation.

The three firms have long used their own formulas to calculate credit scores, with varying grades sometimes resulting.

The joint system, VantageScore, bring consistency to the process and will make it easier for consumer to understand their score. VantageScore will offer ratings ranging from 501 to 990, with those over 900 earning an "A" rating.

Though the credit-reporting firms will use the same exact formula to calculate the scores, they will continue to collect credit data individually.

VantageScore reportedly will make it easier for consumers with limited credit histories to obtain financing. Just like the traditional FICO credit-scoring system by Fair Isaac Corp., borrowers will score higher by making timely bill payments, keeping balances low, and showing a history of paying different types of debt.
Source: Los Angeles Times, Kathy M. Kristof (03/15/06)