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Farewell to Fair Isaac?

Bath, ME (PRWEB) March 16, 2006

Is this the end the end of the road for the familiar FICO credit scoring formula developed by Fair Isaac?

The nations’ three credit reporting agencies announced on Tuesday, March 14, 2006 that they have jointly created a new credit scoring system called “VantageScore”. The primary benefit of the new scoring system is that it provides a consistent credit scoring model that is identical for all three credit reporting bureaus.

In the past each credit bureau has used its own proprietary formula for creating its own credit score. This caused large variations in scores among the three bureaus. With the new VantageScore system, a single, unified formula will be used by each of the three credit reporting agencies. This will result in virtually identical credit scores across all three of the credit bureaus. The only minor differences will be caused by the slightly different data that has been collected by each of the agencies. However, for the first time the formula to interpret that data with be identical across all three bureaus. Lenders as well as consumers will be able to obtain their credit score from any of the three bureaus, and can be confident the credit score would be nearly identical at the other two credit bureaus.

The FICO credit scoring system developed by Fair Isaac Inc, a publicly traded company based in Minneapolis, was represented by a 3-digit number between 300 and 850. The new VantageScore credit score system uses the same 3-digit result, however the numbers will range from 501 to 990. Under the old FICO credit score system good credit was considered to be 720, poor credit was considered to be a credit score under 600, and excellent credit was represented by a credit score of 750 or above. Under the new system, each 100 point range will be grouped on the familiar academic scale used in the school system.

For instance, 501 to 600 will represent very poor credit and would be considered a “F”. A credit score of 601 to 700 would represent poor credit and would equate to a “D”. A credit score of 701 to 800 would be average and equate to a “C”. A credit score of 801 to 900 would represent an above average credit score and would equate to a “B”. And a credit score in the range of 901 to 990 would be an excellent credit score and equate to a “A”.

Christine Carter, owner of http://www.CreditSc0re.com, a website that provides advice and strategies for substantially improving your credit score, sates “Although the exact details of the formula and weighting of the content of the new credit scoring system have not yet been released, the same solid principles practiced to get a high credit score under the old system will be useful to build a high credit score using the new credit score system.”

Comments by David Rubinger, spokesman for Equifax, echoed that same theme, stating “the new score would reflect a consumer’s frequency of borrowing, delinquency in paying bills, and other content.” He also stated that the new credit score was expected to reduce the variance in a consumer’s credit score by about 30% compared with what it was under the old credit scoring system.

Beginning immediately the new credit score is available to mortgage lenders, banks and credit card companies. However, the new credit scores will not be available to consumers until later this summer.

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