There has been a lot of chatter lately about sub-prime lending. What does that mean exactly? Are you a sub-prime lender? How would you know?

To find out, you might want to pay a credit rating agency for your credit score. Scores are available from a number of sources, but the most important vendor of this information has been for many years Fair, Isaac Corporation (FIC $36), which publishes the widely-used FICO score.

FICO scores for individuals range from 300 to 850, with most people falling in the 600 to 700 range. If your score falls below 660, you will likely be classified as sub-prime. The median score in America is 723. It’s like SAT scores: the higher the better.

Why does it matter? Because your credit score can determine what kind of interest rate you will be charged on your mortgage, may determine whether or not you get that promotion you’ve been hoping for and may even make a difference in what kind of insurance you can buy.

Here’s an example of how the score can affect your bottom line, offered on the FICO Web site. The monthly payments on a $300,000, 30-year fixed rate mortgage for a person with a score between 760 and 850 would be $1,809, while a person with a score between 620 and 659 would pay $2,071. That’s real money.

For something so influential, it is surprising that credit scores are not always consistent or uniform (or accurate, but that’s another story.) In the past, FICO and the three main consumer credit rating outfits — Equifax, Experian, and TransUnion — have sometimes issued widely different scores for the same person.

Typically, the three companies provide credit histories to FICO, who then issues a score. The three credit raters also provide scores, but theirs are not widely used.

Your ability to finance a car, then, might have been determined by which agency your car manufacturer contracted with for credit information. Imagine if your SAT scores were higher or lower depending on the color of the paper they’re printed on. Ridiculous, right?

The reason for the variances is that the companies may compile credit information somewhat differently, and because they all use somewhat different algorithms to come up with the score.They can’t be compared because the formulas are secret, though FICO does give some hints.They say that your payment history accounts for 35% of your score, the amount you owe 30%, the length of your credit history 15%, and 10% each attributable to the types of loans you have outstanding and whether you’ve recently taken on a debt.

We also know some of the things that are not allowed in assessing your credit. It is illegal to incorporate any information about race, religion, nationality or sexual orientation into the mix. Interestingly, age is a factor which can be added.

That’s how it’s been, but now the whole process may be about to change, according to Barrett Burns, who has just been named head of a company called VantageScore Solutions, founded last March. Mr. Burns was previously head of the National Private Banking Group of U.S.Trust and has held senior positions with a number of credit operations including Ford Motor Credit Company.

VantageScore is a joint venture owned by the three credit reporting agencies listed above. Its ambition is to produce a credit score that is more predictive and consistent than that available from FICO, and over time to whittle away at FICO’s very large and very profitable share of the market. The company will not only produce a better product, according to Mr. Burns, but it will be cheaper to lenders.

The fees charged will be lower, but the real selling point is the greater predictability of the score. That means fewer delinquencies and higher profit margins for lenders. The new system has a wider range, from 501 to 990, and will consequently allow greater segmentation. Mr. Burns also notes, “If you don’t have much credit history, you’ll have a better chance of scoring with our system.”

Today, the new company is working to convince numerous regulatory bodies and lenders that their scores work and are accurate.

Mr. Burns says that the joint venture tested the algorithm based on 15 million sample credit histories, and the results were indeed compelling. So much so that the partners in the venture will no longer be offering up their own proprietary score service. Still, it’s not an easy sell. “FICO is to scoring as Kleenex is to tissue paper,” says Mr. Burns. In other words, it’s pretty embedded.

You, the well-heeled Sun reader, may have no idea what your credit score is, and may not need to know, but an increasing number of Americans want this information. For one thing, the rise in online banking, brokerage, and shopping has generated rising identity theft, which is often facilitated by the release of confidential information over the Internet. These days it is not only would-be borrowers who are checking their credit reports. The credit rating agencies are offering monthly credit check subscriptions in which they alert customers to any changes in their credit status.

So, if someone gets access to your social security number and tries to take out a loan in your name, or open a charge account at Macy’s, you will find it spotlighted in your report. For many, the monthly fee, which typically runs about $15 per month, is money well spent if it means early detection of a credit breach.

The new score approach may not solve consumer unhappiness with the mistakes frequently found in credit reports, or allow those with poor credit histories to borrow, but a more sophisticated approach seems warranted.

The FICO scoring method was developed in the late 1990s, and since then a great deal has changed in the credit markets. The way many consumers use credit has changed, as has the market’s approach to securitization. A new look at the scoring system should be welcomed by regulators.

Who loves a monopoly anyway?