In March of 2006, the three credit bureaus announced the use of a new credit scoring system called VantageScore. It was to combat the industry giant Fair Isaac and their scoring model the FICO score. The VantageScore came out with a lot of hype, but that was mostly in the minds of the media and consumers not the creditors who will be granting credit.
One difference is the credit score scale. The FICO score uses a credit score scale that starts at 300 and goes to 850. The VantageScore uses a credit score scale that starts at 501 and goes to 990. The FICO scale is large with a range of 550 compare to the Vangtage range of 489. The credit bureaus also assigned a grade with their credit score scale.
· 501- 600 F credit rating
· 601 – 700 D credit rating
· 701 – 800 C credit rating
· 801 – 900 B credit rating
· 901 – 990 A credit rating
Using this, the bureaus intentions were to assign you a grade. There is a limited amount of classes using the VantageSore credit chart. FICO scores have several different levels and further dissect the population when compare to the VantageScore.
Furthermore, there could be variations in your rating depending on which credit score scale is used. You might have a good credit rating with Fair Isaac, but a “C” when using the VantageScore.
The differences carry into how the score are figured. With FICO score there are five different variables used to formulate your FICO score. With VanatageScore, there are six and the one not included in the FICO score is available credit. It is not a major factor in your FICO score, but a piece of the other five.
The two different credit score scales have most of the same methodology, but some things are different. It is hard to tell what carries more wait in different areas and is further hard to determine because both formulas are not released to the public.
The credit bureaus have their work cut out for them if they even want to take over even a small percentage of the credit scoring market. Fair Isaac has been in this business since the 1950’s and is seen as the standard. Another factor to consider is the use of the FICO score in mortgages. Since this is the standard and mortgages are sold in bunches on a secondary market, it will be hard and a long fought battle to change to the VantageScore.
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