Monday, April 03, 2006

New VantageScore Credit Scoring

Have you figured out how your credit score works yet? I haven't either. Around the middle of March a new credit scoring was rolled out aiming to be more consistent. Instead of Experian, Equifax and TransUnion using their own formulas to generate credit scores, they will now all use the same formula in the VantageScore to get one consistent score. The score will range from A to F (and you thought you were through with ever worrying about what your grades were again)! The scores in relation to the letter grades will look like this:

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

Businesses will have a choice on whether or not they want to use this new scoring system. On first glance, I had a few thoughts about whether or not it might fly and become the new standard for credit scoring. First, by todays credit scoring, a score of 601 and 700 are miles apart when it comes to granting credit by most morgage lenders. However, in this system they are the same score, D. Another observation, a score of 700 is a D? I've also seen a lot of credit scores in the past 7-8 years and I've only seen one score over 800 and none over 900. I suspect (hope!) that the new scores have nothing to do with the old scores and someone who might have had a 700 score in the old system would now have a 810 score in the new system. I know change can be a good thing and I'm hoping it will be on this one. But, for now, I'm confused about credit scores!

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