A New Type of Credit Score

What's this new VantageScore credit score I've started to hear a lot about? Will that replace the FICO score?

The three credit bureaus -- Experian, Equifax and TransUnion -- introduced the VantageScore last week to compete directly with the FICO score. But it will take a while before the new score takes over the marketplace.

Most lenders continue to use the FICO score -- developed by Fair Isaac -- when setting your interest rates. You actually have three versions of the FICO score, based on your credit report from each of the bureaus. Most mortgage lenders look at all three of your scores and use the middle one. That's why it's important to get a copy of all three of your credit reports to make sure they're accurate, which you can do free every 12 months at AnnualCreditReport.com.

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But those credit reports don't include your score -- you'll have to pay extra for that. Plus, most don't provide your FICO score. Instead, they send out their own proprietary scores that are on a different scale. These scores are based on similar criteria to the FICO score and can give you a general idea how your credit history stacks up, but they aren't the same score that most lenders use (although some credit card and auto lenders are starting to use Experian's PLUS score). TransUnion sends its own credit score, called the TrueChoice score. And Equifax is the only credit bureau to provide the FICO score from its Web site. You also can order your FICO score, based on all three reports, from MyFico.com.

Having all of these different scores became confusing, so the three credit bureaus came together recently to offer one score, the VantageScore, which they hope will compete with the FICO score.

The VantageScore is on an easy-to-understand letter grade scale -- with scores ranging from 501 to 990, the higher the better. A score of 901 to 990 equates to a grade of A, 801 to 900 equals a B, and so on down to 501 to 600, which is an F. The score can vary a bit based on each of your credit reports, so it's still important to check out all three reports for errors. But the methodology will be the same across all three credit bureaus.

The new score was just introduced last week, and adoption is gradually moving along. The credit bureaus plan to replace the proprietary scores at their Web sites with the VantageScore over the next few months, but right now they're focusing on marketing the score to lenders. Keep an eye out on the VantageScore Web site over the next few months for more details and an explanation of how the score works and what to do to improve it.

The FICO score continues to dominate the market, though, so it's a good idea to check out MyFico.com to see what you can do to improve your score. Also see my column about strategies for improving your credit score before buying a house and Boost Your Score for general information about credit scores.