What is the new VantageScore, and how will it affect your credit?

Your credit score is calculated using complex software developed by Fair Isaac Corporation – commonly referred to as ‘FICO’. The three major credit bureaus - Equifax, Experian, and TransUnion - all use FICO to determine consumer credit ratings, although each uses a different formula. For this reason, you could have a vastly different credit score at each credit bureau.

Recently, all three agencies announced a joint effort to revamp and simplify the way credit scores are determined. The new model is known as ‘VantageScore’, and with it the credit bureaus all have resolved to use the same scoring formula.
FICO scores range from 300 to 850. The new VantageScore system features scores from 501 to 990, and therefore approximates the traditional grading scale:

• 900 – 990 = “A”

• 800 – 899 = “B”

• 700 – 799 = “C”

• 600 – 699 = “D”

• 501 – 599 = “E” or “F”

The problem is that most creditors - banks, credit card companies, landlords, etc. - are more comfortable with the traditional FICO scores. Until lenders begin using VantageScore, it will have very little relevance to the average credit applicant.

It is important to note that while Equifax, Experian, and TransUnion all have agreed to use an identical formula to determine VantageScores, the three bureaus still are competing against one another and therefore do not share information. Since each bureau will have some credit data that the others do not, it still is unlikely that you will have the same VantageScore at each company.