While not fully understood by most people, the FICO credit reporting system is the one that is most widely recognized in the United States.  Developed in the early 1950s by an engineer, Fair, and a mathematician, Isaac, the Fair Isaac Corporation or FICO is the most commonly used credit reporting system although it is not the only one.  Most creditors choose the FICO credit score, which comes from three credit bureaus known as TransUnion, Equifax, and Experian.  This software program generates a three digit score based on information provided for five specific categories.

One thing that many people do not know is that creditors may not report account management information to all three of these credit bureaus.  Some do but some will report to just one or two.  Because of this, if you ever wanted to order a copy of your credit report, it would be essential to obtain a copy of all three in that reported information would vary.  In addition, many people do not know that these three credit bureaus not only use the FICO software but they also use their own version of the credit scoring software.

As you will see from the following, several credit scoring options exist with the two most popular being FICO and Vantage.  Although FICO is the credit scoring system preferred by most creditors although with the newest version of VantageScore 2.0 being released in October 2010, it is being used often too.  While the original VantageScore was developed by all three credit bureaus, it is marketed through Experian.  This new version has improved overall performance over the initial 2006 release.

•    FICO – Reports credit scores of 300 to 850
•    FICO – Reports credit scores of 300 to 850
•    Experian Plus – Reports credit scores of 300 to 850
•    VantageScore – Reports credit scores of 501 to 990 or letter grade of A to F
•    Credit Karma Score – Reports credit scores of 300 to 900

In addition, once you order a copy of your credit report from all three reporting agencies, you would see that the numbers differ.  Typically, the difference between credit score from one report to another is minimal but sometimes, the difference could be as much as 50 points.  Then as you can see from the other credit scoring systems, the numbers to identify good to excellent credit are different from the way FICO reports.

Today, VantageScore just as FICO are partnered with the tree credit bureaus.  Although some of these agencies still use their own scoring system, many have not turned to either FICO or VantageScore.  Both of these systems are excellent and extremely helpful to creditors that want to reduce financial loss, to insurance companies that want responsible policyholders, and to employees looking to hire the best of the best.  Below are the credit score ratings for both FICO and VantageScore.

FICO

•    720-850 – Excellent – Represents the best score range and best financing terms
•    700-719 – Very Good – Qualifies for favorable financing
•    675-699 – Average – Qualifies for most loans and credit cards but with slightly higher interest
•    620-674 – Sub-prime – May still qualify, but interest would be much higher
•    560-619 – Risky – Obtaining a loan or credit would be challenging
•    500-559 – Very Risky – Credit score needs to be repaired and improved
•    499 and Lower – Extremely Risky – Loans and credit would be non-negotiable although secured credit cards would be approved

For FICO, the higher the credit score the easier it would be to secure a loan or credit.  In addition, lenders and creditors would offer the best available interest rates and terms.  However, any credit score lower than 500 would result in you being approved for loans and credit with sub lenders, which means paying high interest, not getting the best terms, and likely being charged high dollar fees.

VantageScore 2.0

•    901-990 – Super Prime (A)
•    801-900 – Prime Plus (B)
•    701-800 – Prime (C)
•    601-700 – Non-Prime (D)
•    501-600 – High Risk (F)

Just as with FICO, for VantageScore 2.0, the higher the score the better.  In addition to this credit scoring system generating a three-digit number, a letter grade is also generated, which removes any guesswork from the score.  In addition to the different numbers and letter grade, another difference between FICO and VantageScore is that while FICO uses five categories of data for a credit score to be generated, VantageScore uses six, with the additional one being “utilization” or amount of credit used.

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