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VantageScore scores court victory

By Janna Herron ·
Tuesday, August 23, 2011
Posted: 4 pm ET

The court match-up between credit scoring behemoth FICO and upstart VantageScore turned in favor of the underdog last week.

The U.S. Court of Appeals for the Eighth Circuit threw out FICO's appeal of a lower court's decision that rejected FICO's claims of anti-competitive behavior, false advertising and unreasonable and illegal restraint of trade regarding the existence of VantageScore.

The two have been in a David-versus-Goliath wrestling match since VantageScore's was launched five years ago by the three credit reporting agencies, Equifax, Experian and TransUnion. FICO filed a lawsuit, saying the three companies engaged in unfair and anticompetitive practices that would hurt the FICO score brand.

"I'm extremely gratified to put this lawsuit behind us, and I look forward to an open market free from the encumbrance of litigation," said Barrett Burns, president and CEO of VantageScore Solutions.

FICO said it is still reviewing its legal options at this time and hopes the lawsuit helps to clear up confusion consumers may have about the existence of other credit scores.

"At a time when consumers most need clarity regarding their creditworthiness, it's imperative that they understand whether the credit scores they purchase are FICO scores, which are used by most lenders to make lending decisions, or merely lookalike scores not actually used by lenders to make lending decisions," according to a FICO statement.

At the time the lawsuit was filed, VantageScore had only 5.7 percent of the credit scoring market. The company now says it is used by four of the five major financial institutions, all five of the major credit card issuers, two of the top five auto lenders and one of the top five mortgage lenders.

Still, FICO is considered the most widely used credit scoring model available.

The victory may convince more lenders to use VantageScore, which claims it better scores consumers, especially those with thin or no credit files, by incorporating data such as rent payment history and utility payments when available. That could help many groups of people such as young consumers and immigrants, who may lack credit history but would otherwise be low-risk borrowers.

What do you think about having a variety of credit scores out there?

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August 24, 2011 at 2:24 pm

I am all for competition, but the bureaus should have no part in the scoring game. They have a monopoly (triopoly if you will) as it is already. This just makes us even more reliant on them. I hope not too many other creditors start to jump on board.

August 24, 2011 at 11:05 am

I agree with FICO and hope they continue seeking legal options against VantageScore. I am opposed of having various credit scores available by various competitors. It is costly to the consumer to monitor the scores and causes more harm than good.