CREDIT SCORE COMPARISONS

By Emily Couch

 

Credit scoring seems like it should be a straightforward concept. All of the financial information provided to consumers, however, is confusing. You may see multiple scores and various criteria used by banks, credit card companies, and other lenders. What is your real credit score? Read on for an overview of credit scores and what they mean for the general population.

Scoring methods all generally use statistics and analysis to determine consumer credit payments over time. Lenders and financial institutions, to facilitate credit, loans, and mortgages to individuals, use them all. Payment history, overall debt, number of cards, and other information is used in most scoring models.

The History of Credit Scores 

Until the 1970s credit scoring systems were not the prescribed way to determine credit viability. Financial institutions used human metrics such as a personal relationship with the client, body language, and initial conversations. The financiers would often share information across the industry when they had mutual clients. Results were often misleading and financial institutions themselves suffered from loss associated with unreliable consumers.

Equifax, now a big 3 credit bureau, paved the way for future credit information collection as the first company operating with the goal of collecting consumer data. TransUnion followed Equifax in the 1960s. Data collection in the 1960s included irrelevant information about personal habits, vices, and opinions. The level of misinformation and distrust by the general population eventually led to the passing of the Fair Credit Reporting Act in 1970, which regulates data collection and circulation of consumer credit information.


FICO (Fair Isaac Corporation) is known as the universal credit scoring method. The three main credit bureaus in the US all use FICO scores in their credit reporting documents. More than 80 countries around the world also use FICO information to improve business processes. FICO helps consumers manage credit health around the world through their analytics and reporting information.


The company was founded in 1956 and now 95% of the United States' largest financial institutions utilize FICO information in day-to-day business. One hundred billion FICO credit scores have been sold since the company began scoring.

FICO began sharing credit information with businesses in the late 1950s when the company began. In 1987 the FICO scores of individuals became more widely available to lending professionals. It wasn't until 2003, with the passing of the Fair and Accurate Credit Transactions Act, that credit information was made freely available to consumers once a year.
VantageScore began in 2006 as a collaboration between the three main credit reporting bureaus. Experian, TransUnion, and Equifax developed VantageScore to improve their techniques for analyzing data. The company focuses on accurately providing consumer information in the context of relevant economic data. They are dedicated to finding a solution and standardizing certain consumer data sets across the three bureaus.

The system has been adopted by large financial institutions and lenders as an alternative to FICO. Roughly 10% of the total market uses VantageScore currently. VantageScore "credit report card" is available to consumers for free as of 2013. The consumer market will likely see an increase in the use of VantageScore as a direct competitor of FICO.

Why, if all of this information is regulated and shared throughout the industry, do we receive different scores from each credit reporting agency? The truth is that all of the major credit bureaus - Equifax, TransUnion, and Experian - look at credit information differently. The companies receive your relevant financial information at different times. If a credit card statement hasn't been paid off when the data is sent to a bureau, your credit score might be impacted by that information.

Financial institutions actually rely on numerous scores to determine their individual criteria for providing credit. FICO, itself, offers more than 50 unique scores. Consumers who receive credit reports only see a selection of information that is determined to be most helpful. These consumer-directed scores are often completely different from the numbers a financial institution will evaluate. They are strictly educational in nature and used to provide consumers with a sense of overall credit worthiness.

Individual companies may also implement their own scoring equations. Ultimately, there may be different scores from FICO, VantageScore, Experian, Equifax, TransUnion, and independent companies. So many numbers floating around makes it difficult for the average consumer to understand which numbers to evaluate for personal finances.


Where to Look 

Those looking to get a sense of overall financial standing can look at any of the scoring methods for a reasonable picture. If you are trying to determine how your score will appear to another party, a lender or bank, you may have more difficulty finding accurate information. Ask your lender which scoring method was used for your situation to determine where to find specific numbers associated with a loan or financial inquiry.

Your true, accurate, real credit score will not be found by evaluating one score. The formulas guiding credit scoring vary slightly, giving more or less weight to factors like credit history or outstanding debt. Most of us do not need a 100% accurate credit score. Personal finances and a general understanding of your situation can be attained through any of the major credit scoring companies.

More information 

If the credit-scoring methodology is still confusing to you, you're not alone. The process is full of nuances and statistics that those who are not in the field of finance often find hard to comprehend. Contact credit services and counselors for more information about your unique situation. Consumers sometimes need help determining methods of improving credit scores, as well as contesting inaccurate information that can drive a score down across all scoring models.

Look at credit reports from each of the 3 bureaus at least once a year. Any information that is inaccurate or misleading may need to be addressed by you, the consumer, or a credit repair specialist. Finding a company that specializes in credit law will provide you with peace of mind that your credit score is in the hands of individuals who know what can legally be done to improve your credit score.

Is your bad credit holding you back from getting approved for credit cards, personal loans, auto loans, or the mortgage of your dream home? Are you struggling to make payments, getting denied loans, or even worried that your poor credit may prevent you from getting a job?

We at Park View Credit know how important it is to have the best credit possible. This is why we have helped thousands of Americans repair their credit with effective and affordable credit services. Our guaranteed services are affordable and come with the same level of service as the nation's leading law firms.

We never let our members think that bad credit is something they have to live with. Park View Credit knows the complicated world of credit, and we're here to help.

CREDIT REPORTS RSS FEED

Free Credit Score Reports; What You Have to Pay

 

Recently, an amendment was passed which allows consumers to have a free credit score report on a yearly basis by the major credit bureaus. However, there are a number of things that you have to keep in mind when applying for your free report. Personal Information and Its Verification A number of websites allowing you to access a free copy of your credit score report require personal information for the verification of your account such as address, date of birth ... (more) December 15, 2014

Small Debts can have a Huge Impact on Credit Ratings

 

It is hard to forget huge financial obligations; small ones can be forgotten, but only for a little while. If unpaid, small liabilities can have disastrous effects on the credit ratings. According to Equifax, close to 200,000 credit files are of collection accounts of less than $ 100. Small debts are usually discovered at their worst, when one is shopping for a car or a mortgage. At such instances lenders charge higher interests. A common reason why people fail to ... (more) July 21, 2014

Managing Your Credit Score And Credit Card Debt For Financial Success

 

According to recent online polls, it was unveiled that people are more likely to be self-conscious about their credit card debts and scores, than they are about their weight and age. These polls were conducted by the national foundation for credit counseling. The outcome of these polls revealed that 37percent of people were concerned about their credit card debt, while 30 percent were worried about their credit score and 2percent and one percent were concerned about their age and weight ... (more) April 14, 2014

A Few Lesser Known Factors That Can Impact Your Credit Score

 

When it comes to factors or credit accounts that can hurt an individual’s credit score, credit cards come first with both their positive and negative results. Apart from that credit, car loans and mortgages also come in the line closely following one another. Unfortunately most people don’t actually realize that there are a few other times of accounts too those could possibly impact your credit score. One of the most important factors that can have an impact on your credit ... (more) October 9, 2013

Credit Scores to Predict Behavior

 

Determination of credit scores is a difficult procedure that takes into account the past credit history to develop future predictions. This requires thorough analysis of information from credit bureaus for understanding the present position of the consumer. Not all data are crucial in this regard. Therefore, segregation of relevant data for predicting credit behavior in the future is required. In general, most people continue with their spending habits whether it is good or bad for years at a stretch. Building ... (more) June 7, 2013

Four New Features Related to VantageScore New Credit Score

 

Those who never got credit scores can now finally have their day in the sun at last Thanks to the all revamped VantageScore New Credit Score, customers who never won a credit score until now can hope to get it at last. A staggering 30 million plastic users do not have the customary credit history duration to become eligible for the existing FICO scores. However, with this new system in place they can have a chance at last for the ... (more) April 3, 2013

Get Finances in Shape Buy a Home

 

In order to get the best rates from creditors it is necessary to have a regular income source, ideal credit score, and appropriate down payments. Today, the requirements for home loan are stricter than ever before. Here below are six tips that show how to remain financially prepared when applying for home loans. Financial Picture Assessment: Evaluate personal finances before looking at the real estate listings. There is a simple formula for calculation of how much a person can afford ... (more) March 7, 2013

How to Have a Perfect Credit Score: Ways to Improve your Credit Report

 

According to an estimate published by Fair Isaac Corporation in 2010, approximately a share of 0.5% consumers reaches the mark of 850 in the FICO score. Despite of the fact that it is really difficult climbing up the ladder from a petty 300 to a whopping 850, there are several people who have successfully crossed the hurdle of 800. FICO published another report in April 2012, which stated that 18.3% consumers have a credit score in the range of 800-850, ... (more) February 11, 2013

Consumer awareness about credit scores on the increase

 

VantageScore, a company that computes a score that is similar to the FICO score, and the Consumer Federation of America, tied up with ORC International in order to survey over 1000 people over phone in the second half of April. The sampling error margin of this data is around 3 percent. Though VantageScore is similar to FICO score, these scores range between 501 and 990. Of the 1000 adults who responded to the survey, 42 percent of them told that ... (more) May 25, 2012

Many consumers still reeling under the pressure of low credit scores

 

Many customers are reeling under the pressure of poor credit scores despite an improvement in the economy. Adding to their woes is the fact that most lenders have tightened the norms for lending loans and credit cards. This implies that people with poor credit scores cannot qualify for loans at low interests, which was a privilege they enjoyed before the onset of recession. One of the recent surveys conducted by American Consumer Credit Counseling has revealed that nearly 40 percent ... (more) April 30, 2012

Back To The Top Of The Page