Understanding the NEW CREDIT SCORING System

By John Ellison
HomeTech Mortgage

With credit use at an all time high it is important to understand personal credit reports and credit ratings (or score).  Last month, the three major credit bureaus introduced a new standardized credit scoring system.

A credit score is a statistical method used to determine the likelihood of paying back money borrowed.  On March 14, 2006 the three major credit bureaus introduced VantageScoresm.  VantageScoresm, which will be in effect by December 31, 2006, is a new credit score designed to simplify and enhance the credit process for both consumers and credit grantors.  Under VantageScoresm, credit score variance between credit reporting companies will be attributed to data differences within each of the three consumer credit files and not to the structure of the scoring model or data interpretation.

Under VantageScoresm scores will range between 501 (higher risk) and 990 (lower risk).  As always, if you have a low credit score the higher risk you become.  Lenders may still loan you money but it may be at a higher rate.