August 30th, 2011

3 VantageScore Myths, Debunked

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If there’s one thing that continues to confound consumers, it’s credit scores. In fact, the Consumer Financial Protection Bureau’s current efforts to clarify score differences show that consumers need some help understanding credit scores.

VantageScore, created in 2006 in conjunction with the three major credit bureaus, is already making an effort to clarify credit scores for consumers in several ways:

  • Using a letter-grade scale of A – F to make it easier for consumers to understand their score.
  • Using a score model that is a collaborative effort between Equifax, Experian and TransUnion to create a common model across the bureaus.
  • By being transparent about the factors and percentages that contribute to a consumer’s VantageScore.

There are still some myths floating around about credit scores and the VantageScore. We’re here to set the record straight on three of the big ones.

MYTH #1: There’s only one credit score.

TRUTH: FICO and VantageScore are just two of dozens of credit score models used by lenders to assess a consumers’ creditworthiness. Consumers don’t have just one credit score. Here are just a few of the scores available and their respective ranges:

  • Equifax has the BEACON score with a range of 300 – 850.
  • Experian has the CE Credit Score with a range of 330 – 830.
  • TransUnion has the TransRisk Score of 300 – 850.
  • The VantageScore model is a collaboration of all three credit bureaus (Equifax, Experian and TransUnion) and has a range of 501 – 990.
  • The FICO Score is Fair Isaacs Company’s proprietary score with a range of 300 – 850.

MYTH #2: The VantageScore is a copy of the FICO score.

TRUTH: VantageScore has a different scale than FICO. While the VantageScore has a range of 501 – 990, FICO uses the scale of 300 to 850. VantageScore uses the three-digit scoring method because lenders and consumers are accustomed to utilizing a three-digit form. One thing that sets the VantageScore apart is its added use of the A – F letter grading scale, which helps consumers better understand where their three-digit score stands.

MYTH #3: VantageScore isn’t used at all by lenders.

TRUTH: Many of the largest lenders are already using the VantageScore model, including four out of the top five financial institutions, five of the top five credit card issuers, two of the top five auto lenders and one of the largest mortgage lenders in the country. In fact, Chase Bank recently adopted VantageScore as the scoring model its lenders use.

Bottom Line: Whichever credit score you choose to monitor, focus on the factors that make up the score, rather than the score itself. Fluctuations and changes in your credit report are more important than small scoring differences. And before you consider purchasing a credit score, remember that you can always get your TransRisk, VantageScore, and Auto Insurance Score for free at CreditKarma.com.

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