The Fair Isaac and Co’s system has been used for more than 50 years to compute your credit score, and hence the name FICO score. But today there is a new method called VantageScore. It is slightly more than a year old, and was first introduced in March 2006. The questions arise: what is the need for a new system and how is it different from FICO? What are the benefits and drawbacks of VantageScore? How do you know your VantageScore?
It is an open secret that the 3 credit bureaus, Experian, Trans Union and Equifax will show a different credit score for a person depending on the underlying information available with them. The aim of creating VantageScore was to offer higher consistency amongst the 3 bureaus to eliminate these discrepancies.
The two systems differ both in the method of computing the credit score and the method of presenting the result. Both systems take into account the same 5 factors in their computation, but while FICO stresses more on payment history and amount outstanding that comprise 65% of the score, these factors only form nearly 47% of the VantageScore. The FICO results lie between 500 and 850. A figure exceeding 720 is regarded as prime. VantageScore lies between 501 and 999 and has extra classification of letters A-F for each class of one hundred. Hence A 901-990 is considered as super prime, C 701-800 is prime and F 501-600 is very risky.
One drawback of FICO is that a score of 720+ signifies a go ahead to a prospective lender, but there is no universally accepted grading of the lower figures. This problem can be overcome with the VantageScore by using letters A-F that lets you immediately get an idea of the risk profile of the borrower. But the critics of this system maintain that within each category, there can be a big difference. E.g. a score of 698 is just out of prime by virtue of 3 points, while 603 has just managed to escape the category of high risk, but both lie in category D.
The prime reason for the variation in FICO credit scores between the 3 bureaus is the difference in the data that each gets. Though the promoters of VantageScore maintain that their system will yield highly consistent results, they accept this is based on the quality of the data.
Your present FICO credit score can be obtained from any of the 3 credit bureaus, but as of now only Experian will give you VantageScore for a price of $5.95.