Just when you thought you understood credit scores

Until now the?method preferred by lenders?for credit scoring has been the Fair Isaac method (FICO) and it is widely recognized. However, there is a new method of scoring that has been launched by all 3 bureaus together as a means of converting the FICO based lenders into the new “VantageScore” method. While the scores themselves are supposed to be easier for consumers to understand it will cause gaps in scoring between the 2 methods that could cause borrowers to have 2 different qualifying profiles.

Why would they make the switch? This is not about making scores easier for consumers to understand. It is business…purely business. The 3 bureaus have to pay the Fair Isaac company for every report run using the FICO method. This new scoring eliminates that cost.

I see this as something that will take quite some time to transition to…especially since not 1 lender signed up for the new scoring system when it was announced.?It will ultimately make it even more challenging for borrowers as some lenders will use FICO and some will use VantageScore.

Here is the VantageScore Ratings:

• 901-990 equals “A” credit
• 801-900 equals “B” credit
• 701-800 equals “C” credit
• 601-700 equals “D” credit
• 501-600 equals “F” credit

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