Credit bureaus launch new credit score system
This is big news in the consumer credit space. It appears the three credit reporting companies are launching a broadside against Fair Isaac’s FICO credit score system. It is called VantageScoreSM. Consumers might benefit from a single, agreed upon credit score—currently your score is different with each bureau. It’s also a way for them to pull back some revenue and control from Fair Isaac. This is part of the press release from Experian:
Atlanta, Chicago and Costa Mesa, CA March 14, 2006 – The nation’s three consumer credit reporting companies – Equifax, Experian and TransUnion – today jointly announced the introduction of a new credit score designed to simplify and enhance the credit process for both consumers and credit grantors.
VantageScore is a direct result of market demand for a more consistent and objective approach to credit scoring methodology across all three national credit reporting companies. This approach is unprecedented in the marketplace.
The new VantageScore leverages the collective experience of the industry’s leading experts on credit data, scoring and analytics. Under the new scoring system, 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.
Citigroup analyst Tony Wible said Fair Isaac's price decline stems from concerns about tougher competition because of the new alliance, but "we disagree with the sell-off." Brad Elchler, a managing director at Stephens Inc., disagreed, saying the new group could be a problem for Fair Isaac. "This product seems like it could become a competitive threat," Elchler said. "Considering that scoring generates over 50 percent of (Fair Isaac's) operating profits, we are concerned about the announcement."