Making the grade: new scoring system introduced by credit agencies.

When you think about your credit score, Fair Isaac Corp.'s three-digit FICO score most likely comes to mind. But if the three credit-reporting agencies have their way, a new grading system may soon take effect.

The new scoring model, called "VantageScore," is the joint effort of Equifax Inc., Experian Ltd., and TransUnion L.L.C. Commercial lenders are testing the system to determine whether they will use it to guide their lending decisions. The score will be available for consumers to purchase later this year.

While lenders currently use various scoring models to rate consumers' creditworthiness, the FICO score is the most widely used. If the lending community adopts the VantageScore (www.vantagescore.com), consumers may have two numerical scores that value the same criteria differently.

For example, the VantageScore gives consumers a score between 501 and 990, while FICO scores range between 300 and 850, so a 700 on one system will have an entirely different meaning on the other. The VantageScore system will also give consumers a corresponding letter grade of A, B, C, D, or F. "I think it's going to be very difficult for many consumers to understand and remember the differences between the two scales," says Stephen Brobeck, executive director of the Consumer Federation of America.

While both Experian and TransUnion say letter grades will make it easier for consumers to understand their scores, Equifax has chosen not to issue letter grades, though the agency will still use the same numerical system as Experian and TransUnion, says David Rubinger, a spokesman for Equifax. "It brings real consistency to the scoring, and that helps your creditors make better decisions," says Maxine Sweet, vice president of public education for Experian.

But critics say that won't stop consumers from having multiple VantageScores since each credit bureau will apply the formula to its own data. "You'll still have three credit scores if you have different information in TransUnion than you have in Equifax," says Renee D. Crenshaw, co-author along with Anthony B. Miles of Everything You Wanted to Know about Credit but Were Too Ashamed to Ask (Rising Star Foundation; $29.95).

Even if lenders ultimately adopt the VantageScore, that does not mean they will stop using FICO scores, says Craig Watts, a spokesman for Fair Isaac. Plus, obstacles to widespread acceptance of the VantageScore remain. "We've introduced new scores in the past that have not done well with lenders in part because lenders say it costs too much money and time to convert their existing operating system to accommodate the new score," says Watts.

Rather than focus on the differences in the scoring models, Miles suggests that consumers learn and practice basic credit management. "Even though the scoring systems may weigh some things differently, the basic principles still apply," says Miles. "For example, consumers still have to pay their bills on time."

WHAT'S YOUR SCORE?

              FICO SCORE     VANTAGE SCORE

BEST           720-850          901-990
GOOD           700-719          801-900
DECENT         620-699          701-800
BAD            350-619          501-700

NOTE: ALTHOUGH THESE ARE ACTUAL SCORES FOR EACH SYSTEM,
VALUE JUDGEMENTS ARE BASED ON THE EDITOR'S DETERMINATION.
SOURCE: MYFICO.COM AND INFORMA RESEARCH SERVICES INC.;
EXPERIAN; BE RESEARCH