Do You Know Your VantageScore?

In the past all credit scoring was based on the system created by Fair Isaac & Co which is known as FICO. A new system is now in use known as VantageScore. Launched in March 2006, the system is just over one year old. This article will look at the reasons why a new system was needed and how it differs from FICO. How will VantageScore benefit you when you apply for credit? Are there any disadvantages to the new system. And where can you find your VantageScore?

It is common knowledge that the FICO scores reported by the three credit bureaus, Equifax, trans Union and Experian, will differ from each other. This is clearly unsatisfactory and the removal of these discrepancies is one of the main reasons why VantageScore was created.

The differences between the two systems concern both the way that the score is calculated and the manner in which the result is presented. While both systems use the same data in their calculations, the emphasis placed on the five factors varies. For instance FICO bases 65% of its score on payment history and amount owing, whereas for VantageScore these factors count for 47%. The way the credit score is reported also differs. FICO quotes a figure between 500 and 850 with 720 or above qualifying the applicant as a prime borrower. With VantageScore the numbers used are 501 to 990, but the letters A-F are also used. Top of the list are the super prime in group A with a score of 901-990. Group B covers 801-900, and so on down to group F 501-600, the worst risk.

Although a score of 720 or more under FICO is a clear indication of a prime borrower, there is no agreed classification of the lower figures. The use of the letters A to F with VantageScore solve this problem and enable you to see where a borrower lies on the scale with ease. But even this system is not above criticism. Because each group covers a hundred numbers, there will be a wide variation within the group. For instance a score of 602 is only one point clear of high risk F, while 698 is just three points away from prime, yet they both fall into group D.

The main reason why the three credit bureaus report different scores under FICO is because the scores are based upon the information that each is given. Although the VantageScore system is supposed to produce more consistent results, its promoters have to admit that in the end this depends on the quality of the data it receives.

While each of the three credit bureaus can supply you with your FICO score, up to now you can only obtain your VantageScore from Experian. It will cost you $5.95.