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Thursday March 16, 6:00 am ET

Holden Lewis

The three national credit bureaus have developed a rival to the well-known
FICO credit score. The credit bureaus say their scoring model will be easier
for consumers to understand and will offer more consistent scores. But it's
too soon to say whether lenders will embrace it.
"It's the most sophisticated, highly predictive scoring model that's
available in the marketplace," says Donald Girard, spokesman for
credit-reporting giant Experian.

The product, called VantageScore, is the result of a joint venture of
Equifax, Experian and TransUnion, the three national credit bureaus.
Representatives from the three companies say VantageScore will have an
intuitive scale -- from a low of 501 (reflecting absolutely horrible credit
history) to 990 (the credit equivalent of getting straight A's from
kindergarten through college).
Furthermore, VantageScore scores will be calculated the same way for each
credit bureau or lender, the representatives say. If your VantageScore from
Experian is 850, it will be 850 from Equifax and TransUnion as well, as long
as they're basing the score on exactly the same information.

That's not always the case with FICO scores, because credit bureaus and
lenders use slightly different scoring formulas and even different scales --
some top out around 850, while others top out around 900. They also have
different data to base those scores on, because while the company that
loaned you money for a car might report your payments to Equifax, it may not
report payments to Experian.

Potential for confusion

The competing credit-scoring models could confuse consumers. A FICO score of
780 means you have good credit -- the equivalent of getting an A or A-minus
in school and worth a low rate on a loan. On the other hand, a VantageScore
of 780 would be merely fair -- the equivalent of getting a C. You might be
turned down for a loan or have to pay a higher rate. The different, but
overlapping, scales mean that consumers who don't understand both scoring
systems could be bamboozled by unscrupulous lenders.

Businesses can buy VantageScores right now, but the scores won't be
available to consumers until later this year, and the price is undisclosed.
In contrast, consumers have been able to buy their FICO scores for three or
four years now via myFICO.com. That service is operated by Fair Isaac Corp.,
developer of FICO scores. Fair Isaac will sell you your credit score (plus a
credit report) from one of the three credit bureaus for $14.95. But Fair
Isaac recommends that you shell out $44.85 for scores and reports from all
three credit bureaus. (The price is $39.84 a year if you subscribe for a
trio of credit reports annually, to be charged to your credit card
automatically.)

Different data, different scores

Fair Isaac explains on its Web site that the more expensive option is better
because "(e)ach of the three national bureaus may have different data on
you -- and you won't know it until you check." It adds: "Since your credit
reports may be different, your FICO scores can also be different, sometimes
by as much as 100 points."

In announcing the new credit-scoring model, representatives for Equifax,
Experian and TransUnion are careful not to denigrate FICO scores and are
reluctant to discuss Fair Isaac at all. But they imply that VantageScore is
better because it will do away with those 100-point disparities.
Equifax's spokesman, David Rubinger: "Essentially, for an individual's
credit score, the only variance in the score will now depend on what is the
data in the file itself, as opposed to it being a difference in the
methodology in how the score is being crafted."

Hey, that's how folks at credit bureaus talk.

Colleen Tunney, spokeswoman for TransUnion, touts VantageScore's
consistency. She acknowledges, though, that each credit bureau has a
different set of data for each consumer, so scores still will vary. Just not
as much as they do now.

Thin-file credit scores

The representatives tout VantageScore's ability to craft a usable score
based on a skimpy credit history.
Rubinger says VantageScore "will produce a greater number of scores on what
we call the 'thin-file population'" -- people without much of a credit
history. The thin-file population includes young people, immigrants,
recently released prison inmates, and some divorced and widowed people.

A mortgage lender expresses skepticism that VantageScore will take hold. "We
will only change scores once our investors dictate to us they would prefer
we use a different score," he says. "My guess is this new score will be slow
to gain popularity, if it ever does."
That's especially true, he says, if VantageScore costs more. Increased costs
would be passed along to consumers and mortgage lenders who are squeezing
dimes nowadays, competing ferociously on costs.