Credit & Money Management
Shootout at the Credit Score Corral
By Joan Goldwasser, Senior Reporter
From Kiplinger's Personal Finance magazine, July 2010
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There's a new sheriff in town. Until recently, the FICO score was the measure lenders used almost exclusively to grant credit and set your interest rate. Now when you submit a credit application, the bank, finance company or card issuer is as likely to use the VantageScore, a competitor created by the three major credit bureaus: Equifax, Experian and TransUnion.
Like the FICO score, VantageScore measures how risky a borrower you are. Scores range from 501 to 990 (FICO scores range from 300 to 850). Although both collect the same information to create your score, each weights the data slightly differently. For example, your payment history makes up 32% of your VantageScore, a little less than the 35% it counts in your FICO score.
When you request a VantageScore, you receive both the numerical score and a letter grade, from A to F. Sheldon Kasower, founder and chairman of CreditReport.com, a consumer credit-information company, says the letter grades make the VantageScore easier for consumers to understand.
Because VantageScore is owned by the three credit bureaus, which jointly created the algorithm that produces the score, Vantage-Scores tend to be more consistent than FICO scores. Barrett Burns, of VantageScore, says that 60% of the time the scores that each of the three bureaus issue for an individual are within 20 points of one another. He also says that VantageScore is more inclusive than FICO. If you have not used credit for six months, you might lose your FICO score.
VantageScore looks back 24 months to pick up data on credit usage, says Burns. You can get your VantageScore for $7.95 at Experian.com.
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Reader Comments (8)
Posted by: MSC at 06/04/2010 12:07:27 PM
Until the three credit bureaus reduce the number of ERRORS contained in their reports, credit scores are still VERY subjective. The data in the credit bureau files feed the scores - if the data is wrong, the score is wrong. Garbage in, garbage out...the big three would be better to fix their internal data reporting and retention flaws first - instead of milking the public by charging for information that should be free.
Posted by: alabamaskys at 06/08/2010 10:38:03 AM
Amen to MSC's comment
Posted by: Wayne at 06/08/2010 12:09:22 PM
The Banking system like the tobacco companies has created a false sense of need and dependance on the the holy grail...."The Credit Score" We lived for thousands of years without it and our citizens and banks survived quite well without it. It like most systems is entirely based on how well the consumer "worked" the system... A True risk scoring model would predict the future.
Posted by: Nomen at 06/08/2010 12:11:38 PM
Since the credit card companies dropped bonus features while boosting rates and fees, I canceled all but one. This lowered my credit score. My most recent car insurance bill went up based on the now reduced score. There is something terribly WRONG with this system. I am not in debt and only had credit cards to take advantage of no longer offered discounts on things like fuel. I paid the cards off every month. As a good manager of my money the credit score should have gone up and NOT down. I will now be shopping for a better deal on insurance. People who are not in debt should have the HIGHEST scores and not be penalized. I may not be able to escape this unfair system but I will keep looking for better deals and paying in cash whenever possible.
Posted by: Aern at 06/08/2010 03:27:35 PM
Oh Look!! Another way to justify themselves... More Wall street and credit card company BS offloaded on the consumer.
Posted by: Kim at 06/09/2010 02:24:59 AM
myfico.com will also sell your email address to spammers and phishers and lord knows who else after you've paid them for your FICO score. Think I am kidding? try it, but I would suggest getting an email address for FICO only because my address was brand new; within 2 days after I began getting spammed and it has reached an all time high now. FTC was told about this as well as I filed a complaint.
Posted by: Richard at 06/21/2010 08:07:44 AM
Thank you for your article. I didn't read it carefully enough and thought that the VantageScore would be a consolidated score based on data in all three of the major agencies. I ordered from Experian and they made it clear on the score page that "This VantageScore is based on information from your Experian credit report. Information often differs among the three national credit bureau reports. As a result your VantageScore based on those reports may vary." Seems a bit strange to me to have to deal with three potentially different scores -- all called "VantageScore." RL
Posted by: GBH at 08/10/2010 04:24:02 PM
Brilliant. Another score that is almost as meaningless as the FICO score. When will the lenders ever figure out that all these scores are garbage? If they worked so damn well, then why are so many people with grade 'A' credit walking away from their homes? Credit scores are meant to be bad for people who have credit cards so that card companies have every excuse to raise rates. This is Capital One's primary business model: find grade B borrowers, and offer them low rates where they will surely miss one payment so they can become exorbitant rates. The score you use for that model is not relevant at all to houses. People that forget to pay a $200 credit card bill for a month are not necessarily 'high risk' house loan borrowers. And those who always pay their $500 credit card bill are not necessarily people who won't walk away from their house if it means not being $200k underwater.