Released: March 15, 2006

Credit agencies use new math on scores

Source: By Sandra Block, USA Today

To try to make credit scores easier to understand, the three major credit bureaus Tuesday announced a common system to gauge whether a borrower is a good credit risk. The agencies — TransUnion, Experian and Equifax — now use their own formulas to create credit scores. That means lenders and consumers sometimes get three different scores for the same borrower. Consumers have to collect all three scores from the credit bureaus to gain a full picture of their credit profiles.

Experian said the scores will be grouped on a familiar academic scale:
A - 901-990
B - 801-900
C - 701-800
D - 601-700
F - 501-600

Experian said it hopes that ‘’as consumers increase their awareness of the importance of credit scores and credit reporting, the consistency of VantageScore will provide the type of information they need to evaluate their credit standing and make sound financial decisions.’’

The new formula could also make it easier for young adults and other consumers with limited credit histories to get credit scores, says Paul Springman of Equifax. In developing the model, the credit bureaus sought ways to assess such borrowers’ credit risk more accurately, says Dana Wiklund, a senior vice president at Equifax.

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