"Consumer Credit Reporting Agencies Create New Credit Scoring System to Simplify the Loan Process.
The nation's three major consumer credit bureaus have created a new credit scoring system designed to make it easier for financial institutions to evaluate loan applications and to give consumers a better way of measuring their financial health.
The credit reporting agencies -- Equifax, Experian and TransUnion -- announced Tuesday (03/15/06) that they're introducing "VantageScore" 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.
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."
In addition to the credit agency scores, some large lenders generate their own internal scores, often using credit bureau data. And many lenders, especially those in the mortgage business, use FICO scores, which are named for the Minneapolis-based Fair, Isaac Corp. that developed them.
Thomas G. Grudnowski, the chief executive officer of Fair, Isaac, said that "for the past 20 years, we've been both cooperating and competing with the credit bureaus ... and that will continue." He added that it could take a long time to establish a competing system.
Dana Wiklund, senior vice president for predictive sciences at Equifax, said that VantageScore "is a new, competitive product to give lenders greater choice, and hopefully greater accuracy, in credit scoring." He added: "The rate of adoption will determine ultimately if the (new) score replaces any in-house or generic scores in the market."
VantageScore ratings will range from 501 to 990. The top end is slightly higher than scores currently in use.
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."
Interesting. I wonder how banks and other lenders will start implementing the new system, and how long it will take for it to fully replace the old sytem.