If anything good has come from the epidemic of identity theft we have learned how important it is to monitor our credit reports and our credit scores.
Just a couple of years ago, most Americans didn't even know they had a credit score, even though credit scoring had been used for a number of years to measure the creditworthiness of borrowers. All lenders depended on credit scores as a major part of determining if you could get a loan or not -- and at what interest rate.
FICO scores are widely used by mortgage lenders, but the three credit bureaus, TransUnion, Experian, and Equifax, have utilized and marketed their own credit scores from their proprietary databases although their models were based on FICO's. As a result, you can actually end up with more than one credit score! Each credit bureau could have a different number.
As consumers realized that their scores could differ and that information kept on them could be different from one bureau to the next, pressure was put on the bureaus to develop one consistent approach to credit scoring. On March 14 the three bureaus announced that they have now collaborated on a new credit scoring system "to benefit consumers and credit grantors." The new system is named VantageScore.
You may still have variations from one credit reporting bureau to another, but the differences should now be because of differences in the information that the credit bureau has on file. As a result, we should see credit scores become more uniform than previously.
As we move to this new approach, it's a good time to make sure that each of the major credit reporting bureaus have the right information on you, so that your credit score -- high or low -- will be the same number, no matter which credit bureau is used.
Michael