The Big 3 Credit Bureaus have recently announced they will be releasing their newly formed Vantage Score this year to take on the current FICO credit rating system. Many are concerned about how effective this new rating system will be. Will consumers benefit from this new source of credit score or will they be left with more information to monitor and more credit reporting information to keep track of?
Traditionally, FICO credit scoring system has been the most highly except credit report and credit score by lenders. This score ranges from 500-850 and will give lenders a overall analysis of what your credit handling is. The new Vantage Score, and what we know about it so far, will be a range from 501- 990 and will attach a letter grade to it ranging from an "A" to an "F". This letter grade could end up hurting consumers more then helping it. Take for example a person applies for a mortgage and the lender sees only a "C" rating which would be a credit score, based on their system in the range of 701-800. What if the best loan rate would need a "B" rating and your score is 798? Typically lenders would be more flexible if they see your score was close to a threshold, but this all encompassing letter grade would make it less flexible.
We have to wonder, when these credit bureaus could not even agree on a credit score as separate entities for an individual, how well will they be able to agree on a score in their new partnership? It is a shame that it took so long for people to become more aware of their credit reports but now they will be forced to learn a new credit rating system to adapt to a new credit report. In a day when identity theft is running ramped in our society, we are forced to constantly monitor our credit reports to know who is looking at them or who could be using our identification to apply for credit.
We will have to wait until the actual scores are released to fully understand all the elements they will use to determine our credit score. Experian, so far is the only one that has committed to releasing their new Vantage Scores later this summer. Competition is always healthy in business, competition will inevitably help consumers, but until we know all the details about the new Vantage Score, we will have to sit back and wait to see how consumer friendly this new credit rating system really will be.
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