Post Number: 1
|Posted on Thursday, March 23, 2006 - 07:57 am: ||
Agencies Adopt New Credit Scoring System
By EILEEN ALT POWELL AP Business Writer
(AP) - NEW YORK-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 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.
"There's clearly been a need out there to have a consistent scoring model that works across all three reporting agencies' data," said Kerry Williams, group president of Experian's credit services division. "And consumers need a consistent score that they can understand and use in their own financial lives."
Credit scores traditionally have been three-digit numbers that lenders used to evaluate the creditworthiness of borrowers. The scores reflect how much debt a consumer is carrying, how good they've been at paying back loans and how many credit applications they have outstanding.
They're important because lenders use them to determine if they'll loan money to consumers and at what rate. The higher the score, the more creditworthy the consumer is considered and the lower the interest rate the consumer will be charged.
The agencies in the past each used their own proprietary formulas to generate their own scores, meaning that a lender dealing with a consumer's application for a credit card or a mortgage might have to reconcile three widely different scores.
With the new system, a single methodology will be used to create the scores for all three credit bureaus, the agencies said.
As a result, scores will be "virtually the same across all three of the national credit reporting companies," said Experian spokesman Donald Girard. Any difference in the scores provided by each agency will reflect differences in the data they've collected in consumers' files, he said.
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."
Consumer advocacy groups expressed concern that the new scoring system would not eliminate one of the biggest problems in the industry which is incorrect information in consumers' credit files.
"That means it's a new recipe, but the same old ingredients," said Jean Ann Fox, director of consumer protection with the nonprofit Consumer Federation of America in Washington, D.C. "It doesn't address the underlying accuracy of the credit reports on which the scores are based."
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.
"Do the customers ... really want to go through the pain of converting to another system?" he asked. "I think only time will tell."
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."
Executives at the credit agencies said that the bureaus did not need to consult with federal regulators before developing their new scoring process. But a number of executives, including Wiklund, traveled to Washington, D.C., on Monday to brief bank, savings bank and credit union regulators on the new scoring process.
"The role of the regulators is to look at the safety and soundness of the institutions they oversee," Wiklund said. "They're very keenly interested so that models don't have disparate impact ... on low income vs. high income individuals, minority vs. non-minority, that kind of thing."
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:
A - 901-990
B - 801-900
C - 701-800
D - 601-700
F - 501-600
Colleen Tunney, spokeswoman for TransUnion, told a conference call with reporters and credit industry representatives that the new score was created by looking at millions of consumer files at the same time to ensure consistent readings across the three bureaus' data.
David Rubinger, spokesman for Equifax, said the new score was expected to reduce the variance in a consumer's scores by about 30 percent compared with what it was under the old system.
He said the score would reflect a consumer's frequency of borrowing, delinquency in paying bills and other "file content." But Rubinger and other credit bureau spokesmen said it was too soon to provide the specific weights for the components.
VantageScore is being independently marketed and sold separately through each of the three national credit reporting companies through licensing agreements with VantageScore Solutions LLC, the joint announcement said. The spokesmen said that VantageScore was jointly owned by the three credit bureaus. They said it did not yet have a headquarters, although an informational Web site had been set up at http://www.vantagescore.com.
The credit reporting agencies are operated by Equifax Inc. of Atlanta, Experian Information Solutions Inc. of Costa Mesa, Calif., and TransUnion LLC of Chicago.
Post Number: 3
|Posted on Thursday, March 23, 2006 - 08:04 am: ||
Finally: New credit scoring system set
March 15, 2006
BY TERRY SAVAGE SUN-TIMES COLUMNIST
Remember back in high school, when it seemed your whole life would be determined by your SAT score? Well, now there's a new score that will impact your entire life.
On Tuesday, the three largest credit bureaus -- Equifax, Experian and TransUnion -- announced they have created a new credit scoring system, "VantageScore," aimed at simplifying the loan process for both lenders and borrowers.
Credit bureaus are best known for compiling your credit report. The credit report merely reflects the information collected by the bureau from anyone who has granted you credit or who inquires about your credit.
Your credit score uses a proprietary modeling process, designed to weigh factors in your credit report -- such as the amount of debt you have outstanding and your history of prompt payments.
Personal finance experts say the biggest factor in a bad credit rating is poor payment history. Consumers who don't pay their bills or pay them late have lower credit ratings.
Beyond that, nothing else affects your credit score, including these four myths:
Myth 1: Checking your own credit will lower your score. Nope. Check all you want through the credit bureaus.
Myth 2: Your age, income and sex are factored into your score. Nope. Credit-industry experts say your place of employment is on a credit report, but even that doesn't affect the score itself.
Myth 3: The higher the salary, the higher the score. No again. And neither will winning the lottery. Pay off your debts. That will improve your score.
Myth 4: Credit scores are averaged when you marry. No. Your score is your score, and follows you like a shadow.
Credit scores have been around for a long time -- used by businesses to codify the information in your credit report and predict your creditworthiness. The best known name in the business has been the FICO score, so labeled because it was created by a pioneering company in the business, Fair Isaac Co.
But a variety of other credit scoring models have been used by both lenders and credit bureaus. The result has been a bewildering range of credit scores that showed wide discrepancies. Depending on which score was used, you might have been turned down for credit -- or required to pay a higher interest rate.
The solution -- jointly created by the credit scoring experts at all three credit bureaus -- is the new VantageScore that will range from 501 to 990. The higher the score, the more creditworthy the individual is deemed to be.
The VantageScore scoring system was created by taking information about a select, large group of consumers from all three credit bureaus at the same time to create a consistent, standardized scoring formula. It uses a new algorithm for modeling the factors that create the score, a process so unusual that the joint venture has applied for a patent on it.
The joint scoring formula will eliminate discrepancies as wide as 30 percent that currently exist in credit scores. But there still will be some disparities because the three major credit bureaus don't receive exactly the same information. Some credit grantors report your payment history to only one or two of the bureaus. Still, using the same scoring system should provide a lot more uniformity to the process.
Now the challenge is to get businesses to actually use this new VantageScore, rather than the other existing scoring models. It's expected that major credit grantors will quickly start evaluating the new score, comparing it to their existing models. If many agree to adopt VantageScore, that will benefit consumers in the long run.
Equifax says it'll wait until lenders accept this new score before marketing it to consumers. That's expected to take at least six months. But the financial institutions have been requesting a consistent, high-quality scoring model to aid them in their credit granting decisions, and they are certain to make this evaluation a priority.
Each bureau will market the VantageScore in its own way and set its own price. Federal law requires each bureau to give you one free credit report a year. (The easiest way to do that is to go to www.annualcreditreport.com and click on the link to each bureau.) So the credit bureaus will use the new VantageScore, along with their credit monitoring services, as a source of revenue.
It's expected that the credit bureaus will bundle their own, or all three, credit reports, along with the new VantageScore, and possibly a subscription to their credit monitoring service for a fee to be determined. But again, that depends on how widely accepted the new VantageScore becomes.
Since so much of our lives are impacted by how we're viewed by credit grantors, we can applaud the three bureaus for their joint effort. It's time consumers knew the real score. And that's The Savage Truth.
Copyright © Terry Savage Productions
Post Number: 4
|Posted on Thursday, March 23, 2006 - 08:08 am: ||
New York (March 15, 2006) - Three consumer credit reporting agencies announced that they have created a new credit scoring system to simplify the loan process for lenders and borrowers.
The Equifax, Experian and TransUnion agencies said their new VantageScore system has grown out of the market's demand for a more objective approach to scoring. Agencies have each used their own formulas to create scores in the past.
In a statement, the agencies said VantageScore "will provide consumers and businesses with a highly predictive, consistent score that is easy to understand and apply."
The new scores, will range from 501 to 990, are already available to financial institutions and will be rolled out for consumers later in the year. Experian said the new scores will be grouped on the familiar academic scale, with an "A" being given to scores in the 901 to 990 range and an "F" being given to scores in the 501 to 600 range.
VantageScore is being independently marketed and sold separately through each of the three national credit reporting companies via licensing agreements with VantageScore Solutions LLC, which is jointly owned by the three credit bureaus. An informational Web site can be accessed at www.vantagescore.com.
The Consumer website that has been created to track this new process is located at www.vantagescorefacts.com Post your information NOW!
About Your Author:
Robert Paisola is an international motivational speaker, trainer and author. He is an expert in the field of Personal Real Estate Investor Training. He is a professional speaker who has been featured on CNN, CNNFN, and the Wall Street Journal. He can answer your questions on the "Basics of the Real Estate Investing Business" to detailed issues regarding your specific transactions. Life Experience Robert Paisola is a Professional International Seminar Speaker in the Areas of Real Estate Investing, Tax Lien Investing, Rental Property Management, Real Estate Coach and Mentor Training and Business Management. He has served companies throughout the world. If you are interested in learning the business from someone like Rob email his office at firstname.lastname@example.org or call our offices Nationwide toll Free at 1-877-517-9555 or visit http://www.allexperts.com/displayExpert.asp?Expert=38419
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Post Number: 2473
|Posted on Thursday, March 23, 2006 - 01:31 pm: ||
Hi Robert, nice profile.
I've posted on the Vantage scores at http://creditsuit.org/credit.php?/blog/comments/stay_away_from_the_cras_new_vant age_scores/
It looks like my advice to stay away from Vantage scores is premature, I read that they won't even be available to consumers until late 2006.
Since you're in the business, do you know anyone who's using the Vantage scores?
And since there's a link to the free credit reports in one of the articles, I need to post my warning again:
If your credit is important, do NOT get the free reports!
Post Number: 2490
|Posted on Tuesday, April 11, 2006 - 03:53 pm: ||
Robert, I just deleted your subsequent postings.
This is a consumer litigation site, not a place for desperate collectors to get business.
Post Number: 7
|Posted on Tuesday, April 11, 2006 - 03:58 pm: ||
Thank you for the feedback!