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Direct Response Marketing

Credit Bureaus Create New Scoring System

15 Mar, 2006 Response This Week

LOS ANGELES- The nation’s three major consumer credit bureaus, Experian, Equifax and TransUnion, have announced the debut of “VantageScore,” a new credit scoring system designed to make credit and loan evaluations easier and much more convenient.

    VantageScore is now available to banks, mortgage lenders and credit card companies, and the new credit scores generated through the system will be available to consumers after the lender rollout later this year.

    The credit bureaus felt that they needed to devise a new method of credit scoring that adhered to a consistent model that would produce the same results across mutiple agencies’ data. Credit scores typically consist of three-digit numbers. The higher the score, the better a customer’s chance becomes of qualifying for loans. Likewise, lower credit scores decrease a consumer’s chances of borrowing or increase the amount of interest paid on the loan. Many direct response marketers use lists of credit scores to target prime or even sub-prime lenders for various types of loans including automotive, mortgage andstudent loans.

    Previously, the agencies all used different formulas to generate credit scores, which meant that consumers would get various scores and consequently differing loan amounts or interest rates. The new system provides some much-desired consistency. The agencies said in their announcement that VantageScore “will provide consumers and businesses with a highly predictive, consistent score that is easy to understand and apply.”

    But the system is not entirely welcomed without complaint. Some feel that consumers will not want to convert to a new system. Plus, many of the larger lenders use FICO scores, named for the Minneapolis-based Fair, Isaac Corp., to generate their own internal scores. Thomas G. Grudnowski, chief executive officer of Fair, Isaac, reportedly stated that with the new scores, it could take a long time to establish a competing system.

    VantageScore ratings will range from 501 to 990. The top end is slightly higher than scores currently in use and it will be likened to the A through F academic scale. VantageScore is being independently marketed and sold separately through each of the three national credit-reporting companies through licensing agreements with VantageScore Solutions LLC, according to the joint announcement.

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