October 30, 2006

Personal Credit Score: Personal Credit Scores Can Be Confusing

Credit scores can be confusing. Talk about an understatement! Did you know that your FICO score from the three credit reporting bureaus can vary by 50 points or more? Did you know that your FICO score from the Fair Isaac Corporation may be different than your FICO score from the different bureaus? Did you know that two of the bureaus, Experian and TransUnion, have their own credit scores called PLUS and True Choice respectively?

Now help is on the way to reduce the confusion. Help is coming from the three credit bureaus. I'm more than a little skeptical about the solution coming from the people causing the problems. Anyway, here's what's happening, as quoted from "The new VantageScore" by Kimberly Lankford in the 10/23/06 Kiplinger's Newsletter.

"Having all of these different scores became confusing, so the three credit bureaus came together to offer one score, the VantageScore, which they hope will compete with the FICO score.

The VantageScore is an easy to understand letter grade scale — with scores ranging from 501 to 990, the higher the better. A score of 901 to 990 equates to a grade of A. 801 to 900 equals a B. And so on down to 501 to 600, which is an F. The scores can vary a bit based on each of your credit reports, so it's still important to check out all three reports for errors. But the methodology will be the same across all three credit bureaus.

The new score was just introduced last week, and adoption is gradually moving along. The credit bureaus plan to replace the proprietary scores at their Web sites with the VantageScore over the next few months, but right now their focusing on marketing the score to lenders. Keep an eye out on the VantageScore Web site over the next few months for more details and an explanation of how the score works and what to do to improve it."

Do I have a lot of hope that this will help? Well, no. If the main reason for the range in credit scores is different or incorrect information in each of the bureaus' credit reports, then the VantageScore will also have a range. The PLUS score and the TrueChoice score will go away, that will help. But, FICO will remain. Now we are left with a FICO and three VantageScores. I guess four is better than six, although not by much.

Where does that leave us? Exactly where we were before. The best we can do is try to minimize the variance in scores by making sure the source of these scores, our credit report, has accurate information in it.

Remember, if you’re not working the system, it’s working you.

PapaJoe