Edge of Bankruptcy

Submit Enquiry




Enquiry Type


Enter Code:

New Credit Score System Supposed to Simplify, Not Confuse

A lot has been written in the past few years about the importance of both credit reports and credit scores. The credit report is a listing of all significant financial transactions by a consumer and whether or not those transactions were completed on time and as agreed. The score is a distillation of everything contained on the credit report, boiled down to a three-digit number. That number is supposed to indicate to a creditor or a lender, at a glance, whether or not the consumer in question is worthy of another loan.

Until recently, the three major credit bureaus, Experian, Trans Union and Equifax, all used different but similar systems to devise the credit score, which ranged from 300 at the low end to 850 at the high end. The different systems meant that a consumer checking his or her score with each of the credit bureaus would receive three different credit scores. This led to some confusion as to which score was the "correct" one. The bureaus have recently attempted to solve that problem by creating VantageScore, a unified scoring system that all three bureaus will use. This should result in a consumer receiving the same score no matter which bureau provides it.

But this hasn't entirely stopped the confusion over credit scoring. Unlike the old systems 300-850 range, the VantageScore uses a different scale that ranges from 501-990. In addition to the numeric score, the VantageScore system will also provide a letter grade, ranging from A-F, as follows:

901-990 - A

801-900 - B

701-800 - C

601-700 - D

501-600 - F

Now the source of the confusion has changed. Many people have erroneously assumed that a score in the old system will be transferred to the new system. That means, to their way of thinking, that a top score in the high 700s or low 80s under the old system is now merely "average" under the new one. How, people are wondering, did a top score suddenly become mediocre?

The answer, of course, is that it didn't and that comparisons between the old system and the new one are like comparing apples with oranges. The new system is completely different and will use a new set of criteria to create the new score from the ground up. A score in the 800 range under the old system will almost certainly become a score in the 900 range under the new one. Consumers have no reason to be alarmed, and in time, the new system will be better and more easily understood than the old one. After all, nothing tells you that you have done well better than being told that you have received an "A".

©Copyright 2006 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a site devoted to debt consolidation, credit counseling, payday loans and personal bankruptcy.This article is free for republishing
Source: http://www.articlealley.com/article_46304_19.html

Don't Miss...
  1. How to Improve Your Credit Score under the New VantageScore System
  2. Credit Score Improves by Paying on Time
  3. How Does The New Credit Score Benefit Consumers?
  4. Free Credit Score, why do I need to know it?
  5. Clearing Up the Question of IVA Fees
  6. Best Rate Personal Loans – One of the Most Sought After Features
  7. Mortgage - An Overview
  8. Liberation From Multiple Loans
  9. Legal Pitfalls of Arranging a Mortgage
  10. Credit Score Basics and the New Credit Score System
  11. Mortgage Pre-Approval and Your Sanity
  12. Liberation From Multiple Loans
  13. Mortgage Information for the creditor and debtor
  14. Improve Your Credit Score By Adding Positive Lines Of Credit To Your Credit Report
  15. Bad Credit Mortgage Refinancing
  16. The Online Mortgage Calculator Top Ten
  17. How to Dramatically Increase Your Credit Score
  18. How To Raise Your Credit Score With The Credit Bureaus
  19. Bad-Credit Car Loans Are Possible
  20. Credit Score is Important When Buying a Car
  21. Raise Your Credit Score In 30 Days!
  22. Payday Cash Advance Loans: Instant Cash Before Your Pay Day
  23. Home Equity Refinancing and Home Equity Loans
  24. Secured Loans UK: Turning dreams into reality
  25. Need To Refinance Your Home Mortgage… Learn How to Eliminate a Bad Credit Score…
  26. Bad Credit Home Loans Consumers With Bad Credit
  27. UK Loans,Online Uk Loans,Flexible Secured Loans,Unsecured Loan,Best UK Loans,Cheapest UK Loans
  28. Understanding Credit Scores and Repairs
  29. Types of High Risk Mortgage
  30. Bid Adieu to Financial Worries with Bad Credit Unsecured Loans
  1. How to Improve Your Credit Score under the New VantageScore System
  2. What's Your Credit Score? Not Knowing Could Cost You
  3. No Credit, Slow Credit Or Bad Credit - Understanding Credit Score
  4. What You Can Do To Improve Your Credit Score
  5. How your Personal Credit Score Helps Generate Capital
  6. Credit Score is Important When Buying a Car
  7. How To Quickly Improve A Credit Score
  8. The Credit Score Rating Scale Explained
  9. The Secret To Increase A Credit Score
  10. What is the National Average Credit Score?

© Edge of Bankruptcy 2008. All Rights Reserved