To determine the creditworthiness of an individual, lenders have to depend on credit scores provided by the three major credit bureaus. This is generated on the basis of the algorithm developed by Fair Issac and Companies (hence the name FICO Score). But it has been often noticed that there exists a distinct deviation in an individuals credit report as each of the three bureaus use a slightly different formulae while calculating the score. Hence borrowers and lenders tend to question the accuracy and effectiveness of the scoring algorithm when discrepancies between the bureaus are large. VantageScore is an attempt by the three bureaus to reduce this difference by a larger extent as all of them will use a similar formula while computing. Hence credit score is expected to be more consistent with the introduction of VantageScore.
VantageScore will use the same data used to calculate the FICO score like the interval of paying of bills, amount of outstanding debt, etc. Unlike FICO score which ranges approximately between 300 to 850, VantageScore will have a scoring range of 501 to 990. It will also assign a letter grade depending upon the consumers credit score:
The higher the score the higher the creditworthiness. On the other hand lower the score, higher the probability of the consumer defaulting in a financial transaction. The scoring criteria used will be the same across all three national credit bureaus. Moreover it can be available online. It is expected to be available to consumers later in 2006.