VantageScores vs. FICO scores
Credit scores are used as a factor in deciding whether or not to extend credit, and if so, at what rate. (Note that credit scores are NOT the same thing as credit reports.) Having a good credit score is important if you want to borrow money, and it’s especially important if you want to get a decent interest rate on the money you borrow. Having a good score can save you thousands of dollars over the life of a loan. But what’s considered a good score? It depends, both on the point of view of the organization that’s asking and the scores used.
Until recently, when someone talked about a credit score, you could be pretty sure they meant a FICO score. FICO scores were developed in 1958 by Fair Issac as a way to quantify credit risk. You’ll have 3 FICO scores: one for each of the major credit reporting agencies. They are based on models that use the information reported in your credit files (which is why they’re each slightly different, but usually similar.) FICO scores range from 300 to 850, with anything under 500 being substandard. (According to myfico.com, the median U.S. FICO score is 723, meaning that half of the people have a credit score below 723 & half have a credit score above 723.) You can order your score on the myfico web site. FICO scores are based on the following factors: 35% payment history, 30% amounts owed, 15% length of credit history, 10% new credit, 10% types of credit used.
Things got a little more confusing in March of this year when a new credit scoring method was introduced: the VantageScore. According to the Experian web site, a VantageScore is “the credit industry’s first credit score developed jointly by Experian, Equifax and TransUnion.” In other words, it’s competition for FICO, and there’s only one score for all 3 credit reporting agencies. VantageScores range from 501 to 990. Consumers are essentially graded based on their VantageScores on a scale from A to F with “A” being “Super Prime” (a great thing) and “F” being “high risk”. (You can order your score on the Experian web site for $5.95.) Your VantageScore is comprised of the following factors: 32% payment history, 23% percentage of credit utilization, 15% balances, 13% depth of credit (length of your credit history), 10% recent credit, and 7% amount of available credit.
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