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Credit scores from each bureau vary due to differences
in scoring methodologies and data.
Because VantageScore is touted as using the same algorithm
to calculate scores across all the credit reporting companies, numbers
should vary only if the bureaus have different data on file.
Data variances sometimes occur because lenders report
credit activity to only one or two bureaus.
Credit records often also contain inaccurate information.
Who's using VantageScore?
Today, more than 200 lenders are testing VantageScore as a primary
scoring method, according to Experian's Oliai, who says he expects
lenders will test the three-month-old system for at least six months
to a year before using it to make credit-granting decisions.
To date, no lenders have announced they're switching
to VantageScore. Credit bureaus expect that smaller lending institutions
will be earlier adopters of the scoring system and that large banks
will wait longer and perform wider testing before considering a
switch.
While the credit bureaus have not disclosed how much
they will charge lenders to use VantageScore, Oliai claims the amount
is competitive with the cost of tracking credit scores through FICO.
Although lenders can implement both FICO and VantageScore, he expects
that the vast majority will eventually pick one or the other. Each
credit bureau prices and markets VantageScore independently.
Who benefits from VantageScore?
While VantageScore will be confusing at first, it's unlikely to
cause much change in the way consumers apply for and receive credit,
says Matt Fellowes, author of a Brookings Institution study
on credit scores and financial mobility.
"It's clear this is a business-driven decision.
This isn't a consumer-driven decision," Fellowes says, regarding
the credit bureaus' collaboration on VantageScore. "It's clear
that FICO has the major market share and the bureaus have always
been hurt that they each have their own scores."
Fair Isaac, the Minneapolis financial services firm
that introduced FICO in 1989, stands to lose the most should, VantageScore
gain market acceptance. Its stock fell 6 percent the day VantageScore was introduced The credit bureaus stand to profit the
most, should VantageScore succeed.
For consumers, Fellowes says, VantageScore falls short
of addressing a primary concern: mistakes in credit records. Currently,
credit bureaus are not required to publicly report assessments of
the accuracy of their information, although they do track such data
internally. Fellowes also sees risks associated with using a single
creditworthiness formula at all three credit bureaus.
"I'd much rather take the average between three
different scoring methodologies than to take the exact same methodology
across all three bureaus," he says.
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