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NEW SYSTEM FOR CREDIT SCORING!
There is new scoring system being used by Transunion, Experian and Equifax, that helps determine whether or not a potential borrower is a credit risk.

Currently, a unique formula is being used by all three major credit reporting agencies to formulate credit scores. As a result, consumers and lenders receive three, often vastly, different scores. In order to gain a thorough profile, consumers will need to obtain all three of their credit scores from the major reporting agencies. This can be done by purchasing a 3-in-1 credit report.

This new formula is also going to make it simpler for those with limited or no credit histories to obtain a credit score. The purpose of this new model is to help identify a borrowers' credit risk more precisely.

Credit score discrepancies will not be eliminated by the new VantageScore. There are many different factors that make up credit scores, i.e. amount of debt, payment history, amount of available credit, the length of time credit has been had, etc.. Any type of bank or lending institution including but not limited to mortgage lenders, credit card companies, auto financing institutes, etc..,  will use credit scores to determine the risks when lending money and issuing credit cards and lines of credit.

The VantageScore will be available to all consumers in a few months and will be able to be purchased from all three credit reporting bureaus. It still is not clear as to how creditors and lenders are going to use this new scoring system.

The bottom line is that FICO scores are accurate, with the majority of lenders not likely swaying from the system. However, the VantageScore is going to make it easier for consumers to comprehend their credit worthiness as a result of the letter grades this system is going to use.

Individuals with 'A'  credit are going to be eligible for the best interest rates. those with 'F' will pay the highest rates, or may not even be able to obtain credit. The new system used scores that range from 501 to 990, compared with 350 to 850 for FICO scores.

Consumers should not get confused by this scoring system. For example, an 800 score with the new system is equal to a C, which is mediocre. On the contrary, an 800 score with the FICO system is considered great credit.

Below is a breakdown of what letter grades are going to be assigned to what range of number scores.
A - 901-990
B - 801-900
C - 701-800
D - 601-700
F - 501-600

It is anticipated that the new VantageScore will provide consumers with consistent information that can be used to analyze their credit standing, and ultimately helping them to make wise financial choices.

This new system may also help consumers understand what is needed for them to improve their scores and/or fix errors.

**Consumer Alert - FICO has recently decided to eliminate authorized user accounts from the credit scoring model. This will have a major impact on those looking to establish credit histories or rebuild credit.

More Credit Report Articles
  Understanding What Joint Credit Is


 

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