Did you hear the good news? It was announced last week that Equifax, Experian, and TransUnion have teamed up to develop a new credit scoring system. Scores using the new system, dubbed VantageScore, will be available for purchase from the three major credit bureaus within a few months. Unlike FICO's scores that range from 300-900, VantageScore scores will range from 501-990 and can be compared to a typical academic grading system: 901-990 = A; 801-900 = B; 701-800 = C; 601-700 = D; and 501-600 = F. But do we really need a new credit scoring system?

One of the advantages being touted by the new system is scoring consistency across credit bureaus. Currently, your credit score will usually vary from one credit bureau to the next. A common algorithm should make the scores consistent across the board, right? Well, not exactly. Just because all three bureaus will be using an identical scoring algorithm does not mean that the results will be the same. There will still be discrepancies between scores from different credit bureaus because the data that is plugged into the algoritm differs from one credit bureau to the next. Some creditors report to one bureau. Others will report to two or all three. So a consumer will have a different credit report, and therefore a different score, from each of the three bureaus. This will still continue, even under the new VantageScore model.

What's more is that the vast majority of lenders have been using Fair Isaac's FICO credit scoring model for decades. A switch to the new VantageScore model is unfeasible and unlikely. Perhaps the 501-990 model put into the context of a typical academic grading system is a bit simpler to understand, but in fact, it's all quite arbitrary. For lack of a better comparison, I find this somewhat analogous to the United States government attempt at metrication by replacing the standard measurement system of feet, miles, gallons, etc. with the decimal-based metric system.

Bottom line: Admittedly, this is a great PR stunt by the credit bureaus to get us consumers to buy their new scores, but in truth, it doesn't seem like it's worth all the fuss. Just because the scoring system is changing doesn't change your credit history. Bad credit is still bad credit; good credit is still good credit; and one foot still equals 0.3048 meters.

Last week, OfficeMax became the focus of reports of the debit card fraud wave that had resulted in over 200,000 debit cards needing to be replaced by Bank of America, Citibank, and Washington Mutual. Visa and MasterCard had both acknowledged that a merchant had been the target of a data theft, although neither would identify the merchant. Police reports, however, have shown that the common denominator in the vast majority of the 200,000+ victims of the fraud wave had shopped at OfficeMax.

More recently, Visa issued a warning to retailers that a certain version of some Fujitsu debit card transaction software may be storing sensitive customer data, including PIN codes. Fujitsu Transactions Solutions' customers include Best Buy, Staples, and ... OfficeMax. Although, it is unknown whether or not these retailers are using the allegedly faulty version of the software. Could Fujitsu actually be to blame for the debit card fraud?

Neither OfficeMax nor Fujitsu are taking responsibility for the security breach. Fujitsu claims that no sensitive data could be stored by its software alone; additional tweaks would have to be made to the programs. OfficeMax claims that they had found no evidence of any data theft on their end. So the mystery continues.

Most likely, the breach will be traced to some source in due time. Meanwhile, it is baffling to see that there could possibly be such a huge crack in the system of debit card security. Especially with identity theft becoming more and more prevalent, one would think that retailers and software developers would take extra precautions to ensure that their customers were being taken care of. Ultimately, the responsibility lies with the retailer. No matter at which exact point in the chain the security breach occurred, it is the retailer's responsibility to seal these cracks. They are the ones with whom the customer has the relationship and they are the ones who will take the brunt of the poor PR should something like this happen. I know one thing for sure: I won't be using my check card at OfficeMax any time soon.

Usually when you hear about 0% balance transfers, you think of consolidating high interest credit card debt into a new 0% credit card. But what about other debt, such as a car loan or even a home loan? What if you were to transfer that balance onto a 0% balance transfer credit card, essentially financing your debt at a 0% rate? Most would advise against this for two reasons: Firstly, the 0% APR would only apply during the introductory period, which is generally 12 months. Secondly, it is a huge risk to do this because if for some reason you aren't able to pay the debt off within the introductory period, your interest rate on the debt would go through the roof.

This risk however does not bother LAMoneyGuy, who is planning to refinance his car loan by obtaining a 0% balance transfer credit card. Admittedly, the 0% balance transfer arbitrage risk for him is minimal, since he currently has enough money in his savings account if he needs it in 12 months. Some more interesting thoughts on this are at Blueprint for Financial Prosperity.

So if LAMoneyGuy can do it, shouldn't you too? Some advice — at Credit Card Blog, we tend to be risk-averse. In fact, we are extremely risk-averse. We would never advise playing the 0% balance transfer arbitrage game unless you have in hand some emergency cash, as LAMoneyGuy does. You never know what might happen with your cash flow situation several months into the future. Should it dry up for some reason, you could be left with some pretty hefty interest on your new 0% balance transfer card a year from now. As usual, be aware of the risk and play it smart, or don't play it at all.

In the United States, credit reports are compiled by three credit bureaus — Equifax, Experian, and TransUnion. These three major credit unions use the FICO scoring system to determine credit scores. As credit history data compiled may vary from one credit bureau to the next, so too may credit scores.

The FICO score can range from 300―900 and the mean score is 723. Fine, but just what exactly does that mean? Your FICO score is determined by the following factors:

35% Payment history — Do you pay your bills on time? Any late bill payments, particularly those that are more than 30 days late could adversely affect this section of your score.
30% Amounts owed — How much outstanding debt have you accrued? How much do you owe on car loans or home loans? The more you owe, the lower this section of your score will be. Also included in this section is the amount of cards you have at their limits.
15% Length of credit history — Do you have a long established credit history? Generally, more data in your credit report helps your score by increasing the reliability of that data. Too short a credit history does not give credit agencies a very good look at your long-term habits.
10% New credit — Have you had many recent inquries on your credit report? An exorbitant amount of recent inquiries could mean that you're experiencing financial trouble. This could lower your credit score.
10% Types of credit used — How many loans and credit cards do you currently have? Too many credit cards or loans from finance companies, like the ones you see on TV at 2:00 a.m., could negatively affect your score.

The exact algorithm used to calculate credit score is confidential proprietary information owned by Fair Isaac. But carefully considering the points laid out above should help you take the necessary steps to improve your score.

Last year, the United States' personal savings rate was -0.5%, the first time that it has been negative since the depression era. In a recent broadcast of To the Point, a daily national news radio program co-produced by KCRW Los Angeles and Public Radio International, host Sara Terry discussed the growing American consumer debt with guests Tony Proctor, CFP and president of Proctor Financial; Robert Manning, author of Credit Card Nation; Chris Thornberg, senior economist at UCLA Anderson Forecast; and Shira Boss, financial journalist and author of Green with Envy.

Listen to the show: "Drowning in Debt" on To the Point (3/8/06)

Early yesterday morning, the FBI raided a home in Las Vegas and busted a credit card fraud ring that had been counterfeiting up to 600 fake cards per day. Two Romanian men were arrested in the raid on the Vegas home. Six others were also arrested, five in New Jersey and one in New York. The ring had been able to obtain credit card numbers by having members inside retail and restuarant locations.

Read more at KVBC: FBI raids Vegas home; busts credit fraud ring