The Vantage Score: Making the Grade

The FICO score, or the credit score calculated by Fair Isaac Corporation software, has long been utilized by the three major consumer credit bureaus – Equifax, Experian and TransUnion. However, FICO is about to get some serious competition. The new “Vantage” score promises to revamp credit.

FICO has been used to determine how “worthy” one is of credit, while the VantageScore may shine light on more aspects of the credit history. According to Vantage press releases, this system lets credit agencies avoid use of a more manual review process that is necessary with FICO. In fact, these disparate manual processes associated with FICO are one reason why scores historically have varied so widely among credit reporting agencies.

The criteria by which VantageScores will be calculated:

• Almost all accounts for inclusion on your report will be recorded if they fall 90 days behind payment.
• A 24-month consumer performance period is used.
• Factor codes will be used to explain the scores, making Vantage more efficient as an industry standard.

Vantage is a powerful calculator of credit that probably will speed up credit decisions, and will help formulate clearer criterion for granting credit.

Early criticism of Vantage largely has been limited to consumer groups. These critics claim that the new scores will be misleading and confusing, although they have little power to change the system for the benefit of consumers.

Vantage supporters, on the other hand, maintain that the new data approach will be a better predictor of credit risk than FICO. Most importantly, perhaps, Vantage promises to add hard data on ‘thin-file consumers’, or those individuals who tread so lightly upon credit that they do not leave enough footprints to predict where they will go in the future. The ability to gauge the credit potential of such consumers will aid businesses greatly in adding or blocking new credit customers.

The range of credit scores will be altered significantly by the incorporation of the Vantage system. A FICO score of 800 would be excellent, while an 800 VantageScore would be average, so consumers must understand the new system. The VantageScore very likely will be adopted by at least two of the three major credit agencies, so it is time for consumers to inform themselves. Vantage was developed by an “independent” company that - incidentally - was created, and is owned, by all three agencies.

There still is time for the proposed VantageScore to become more consumer-friendly before its incorporation, but I wouldn’t count on it. As scoring becomes more business-driven and proprietary, consumers need to become more aggressive in owning the data that goes into their scores. Unfortunately, the current plan is to make Vantage available for businesses first, with consumers able to access the system only after this introductory period. This is nothing new - FICO has been around since 1989, but it was not until 2001 that consumers got to see into the vault!

The best actions you can take to take prepare yourself for the VantageScore are to concentrate on continually improving your existing scores, and to learn how to introduce more positive data into your report.