The previous 'Watching Your Credit' article has been moved to the Archive page

New - March 14, 2006
Just as the McDonald Services web site was about to explain how the 'secret' consumer credit score was calculated, the three big credit reporting agencies - Equifax, Experian and TransUnion - announced that they have developed a new system.

The three-digit number that tells lenders about your credit worthiness has a new formula, one that is consistent across all three agencies.

Called 'VantageScore', the new credit scoring system should make it easier for financial institutions to evaluate loan applications and give consumers a better way of measuring their own financial health. Visit http://www.vantagescore.com for more information. 

Announced Tuesday, March 14, 2006, "VantageScore" is being introduced 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.    Previously, credit scores were kept hidden from the consumers themselves.   The formulas used to create these numbers were complex.

The numbers are important.
Credit scores traditionally have been three-digit numbers that lenders used to evaluate the creditworthiness of borrowers. The scores are based on the consumer's credit range (sum of all credit limits), how much debt a consumer is carrying and how good they've been at paying back loans.

Lenders use them to determine if they'll loan money to consumers and at what rate. The credit score is a number easy to understand.  The higher the score, the more creditworthy the consumer is considered and the lower the interest rate the consumer will be charged.

In the past, Equifax, Experian and TransUnion each used their own proprietary formulas to generate their scores, meaning that a lender dealing with a loan application for a credit card or a mortgage might have to interpret three possibly widely different scores.

The new credit score system uses a single methodology to create the scores for all three credit bureaus.

With this new system, the scores should be the same across all three of the national credit reporting companies.  Any difference in the scores provided by each agency will reflect differences in the data they've collected in consumers' files.

Is the new scoring system different?
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."  The fact is, the new numbers will be derived from the same information as before, just calculated consistantly across all three credit reporting agencies.

VantageScore ratings will range from 501 to 990. The top end is slightly higher than the FICO scores currently in use which is about 850.

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

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

Go to http://consumeraction.gov for information on this new credit score reporting system as it develops and for other consumer information.

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Just remember to visit McDonaldServices.com on a regular basis for updated information and news.