VantageScore is intended to ease confusion and simplify. So far, it isn’t working.

Most consumers are well aware that lenders look at their credit report in order to determine whether that consumer should receive new credit or a new loan. That report lists all current debts, all repaid debts, previous judgments and bankruptcies, and just about anything else of a financial nature in the history of the consumer in question. When a lender or creditor asks for a copy of an individual’s credit report, they also receive a copy of that person’s credit score.

The credit score is the information contained on the report, distilled down to a simple, three digit number. That number allows the lender to check at a glance to see if the borrower is worthy of the loan. Much has been written about credit scores, both here and elsewhere, and the American public has become somewhat preoccupied with them. Until recently, each of the three main credit bureaus has used a variation of a model similar to the FICO score system devised by Fair, Isaac and Co. That system ranks creditors on a scale from 300-850, with the higher number representing a better overall credit rating.

The systems were all slightly different, and only one bureau actually used the exact FICO model. In order to simplify matters, the bureaus have recently joined together to form VantageScore, a unified scoring model that all three bureaus will use from now on. This is a different system from the FICO model and uses a completely different range of scores. The VantageScore system has scores that range from 501-990, again with the highest number representing the best credit. In addition, the score will be accompanied by a letter grade, as shown below:

• 901-990 - A 
• 801-900 - B
• 701-800 - C
• 601-700 - D
• 501-600 - F

Anyone who has ever attended school should understand this system; the letter grades point out even more bluntly where the consumer stands on the credit rating scale. But it isn’t the letter grades that are causing the confusion; it is the numbers themselves. Many consumers have erroneously concluded that the existing scores will simply be “moved over” to the new system. That is, if you have a good, solid rating of 750 under the FICO system, which should allow you to get very favorable lending terms when you apply for a loan, your score will now rate only a “C” under the new system. A “C” in the new system is merely an average score.

How, people wonder, does a really good figure under the old system become an “average” grade under the new one?

The answer, of course, is that it doesn’t. The new systems are like apples and oranges, and the old system has nothing to do with the new one. The new system, like the old one, looks at a variety of criteria in a consumer’s financial report and that criteria is used to create an entirely new grade in the new system. In all likelihood, 750 under the old system would probably translate to the high 800s in the new system, or a high “B” grade.

If your financial health was good before, it will still be good under the new system. 

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