Bad credit car loan customers should know what VantageScore is and how it differs from the FICO score
Know your credit score
Here at AutoNet Financial, our goal is to put customers with bad credit into affordable, reliable vehicles so that they can repair their credit and move back into conventional financing as soon as possible. We also stress the fact that knowing your FICO score (credit score) and what is on your credit report is very important before you try buying a new car.
Since March of 2006, the three major credit bureaus have thrown a new wrinkle into the “credit score” part of that statement.
It’s called VantageScore
VantageScore is the new scoring model that was developed by the three major credit bureaus. The new score uses a numerical rating of 501 to 990 (unlike the FICO score range of 300 to 850) and then assigns a letter grade to the score in the following manner:
• 901-990 equals “A” credit
• 801-900 equals “B” credit
• 701-800 equals “C” credit
• 601-700 equals “D” credit
• 501-600 equals “F” credit
The reasoning
Basically, the bureaus did it to save money. When a business runs a credit inquiry on an individual, the credit bureau pulls up the credit history, then runs it through the FICO system and sends the report, along with the credit score, to the business. Since the credit bureau used the FICO model, they also pay Fair Isaac (the company that created the FICO scoring model) for using the system. By creating their own scoring system, the three bureaus (Equifax, Experian and TransUnion) can get around using the FICO score and avoid paying the fees to Fair Isaac.
Since Fair Isaac owns the scoring system as well as the scoring model, VantageScore could not duplicate the scoring system, so that had to be changed.
What does it mean?
At this point in time, it is hard to say since many lenders have been reluctant to adopt VantageScore. As it is, consumers have a difficult time trying to manage their credit history on three separate bureaus. If there is incorrect information listed on all three bureaus and you try and have it removed, two of the bureaus may remove it while the third refuses to do so. Throwing in a second scoring system could complicate things even further.
If the new scoring system works to the advantage of the consumer, especially those with new or limited credit histories, it may very well be an improvement. But if the new system further limits worthy customers from having banks extend them credit, the consumer loses again.
