This week, Vantage credit scores became available to consumers through Experian, one of the three major crediting reporting bureaus. While many consumers-especially those monitoring credit after bankruptcy or some other setback--might be curious enough about their Vantage scores to spend $5.95 for that information, the real impact of those scores remains uncertain.
Many credit-granting businesses are "testing" Vantage scores, but thus far, none have reported switching to reliance on the new scoring system.
The credit bureaus claim that Vantage scores will create a uniform system, so that the three major credit bureaus aren't reporting different scores. The unique formulation used to determine Vantage scores looks familiar, though-it bears a striking resemblance to the list of factors used to determine FICO scores.
Consumers probably can't expect to see any significant changes in access to credit or rates-at least, not right away.
The big change they can expect is loss of clarity.
When the three major credit bureaus were each reporting their own scores, the rubrics used to calculate those credit scores varied, but the scale did not. Although there were differences among the scores reported, the meaning of those scores was clear. It was also consistent with the industry-leading FICO scale.
Now, however, different credit-granting businesses may be using different scales. The potential for confusion among consumers is significant. For instance, an applicant with a credit score of 750 under the currently-dominant FICO system is in good shape. The applicant is not only considered a good credit risk, but will often qualify for preferential rates.
However, under the new Vantage system, scores will be scaled differently. Letter grades will be assigned in conjunction with three-digit scores.but those three-digit scores won't bear any relationship to the familiar FICO scores. Grades will be assigned like this:
So a 750 on the new scale doesn't merit preferential treatment at all: it receives a letter grade of "C" and, depending on the requirements of the business in question, may mean a denial of credit altogether.
A consumer will now have two "credit scores"-one on the FICO scale and one on the Vantage scale. Different companies may opt to use different systems. Therefore, a consumer will no longer be able to hear a three-digit number in isolation and know what it means. That's particularly important for consumers who are rebuilding credit after bankruptcy or are monitoring credit in an effort to make applications under the most favorable possible terms.If you're struggling with credit card debt, perhaps it's time to speak with a local lawyer about filing bankruptcy.
If you are in the process of re-establishing credit after bankruptcy, or if you're just carefully monitoring your credit scores to take advantage of the best rates and opportunities, you may soon have to add "Which credit score do you use?" to the list of questions you ask a potential creditor.