Credit bureaus create alternative to FICO
By Holden Lewis • Bankrate.com

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.)