[ad_1]
For more than fifty years, your credit score has been calculated using Fair Isaac & Company’s system and is therefore commonly described as your FICO score. There is now a new system known as VantageScore. It is over a year old having been launched in March 2006. So why was there a need for a new system, and how is it different from FICO? What are the advantages of VantageScore, and more importantly, what are its disadvantages? And finally, how can you find your VantageScore?
It is a well known fact that the three credit bureaus, Experian, TransUnion and Equifax will each report a different credit score for an individual based on the company’s records. VantageScore was created with the intention of providing greater consistency among the three bureaus in order to address these inconsistencies.
The two systems differ in both the way credit scores are calculated and the way the results are presented. Both systems use the same five factors in their calculations, but while FICO places the most emphasis on payment history and outstanding balances, which make up 65% of the score, these factors only count for 47% of the VantageScore. FICO uses a score between 500 and 850 for results, and anything over 720 is considered prime. VantageScores range from 501 to 990, with additional classifications of AF letters for each group of one hundred. So A is 901-990 which is considered super prime, C is 701-800 prime and is at the other extreme. F 501-600 is considered as high risk.
One criticism of FICO is that while a score of 720 and above gives a clear signal to a potential lender, there is no generally accepted grading of lower figures. This problem is solved with VantageScore by using the letters A to F that enable you to tell at a glance which category a borrower falls into. However there are critics of this system who point out that there will be wide variation within each category. For example, a score of 698 is only three points short of prime, while 603 is only two points away from high risk, yet both fall into category D.
The main reason FICO credit scores differ among the three bureaus is because of the differences in the data each receives. While VantageScore’s promoters say their system will produce more consistent results, they acknowledge that ultimately it depends on the quality of the data.
Your current FICO credit score can be obtained from each of the three credit bureaus, but as of today only Experian will provide you with your VantageScore and it will cost you $5.95.
[ad_2]