The Basics of FICO, TrueCredit and Vantage Credit Reports

Do you feel baffled and bewildered when you take a look at your credit report scores? Well, if you do you're not the only one.

Each of the 3 credit bureaus namely Equifax, Transunion and Experian generates a separate credit report and develops a score based on this credit report.

If you're surprised by the difference in scores from these 3 credit reporting agencies you'll be interested to know that these variations take place on account of diversity of information in the credit report and scoring techniques.

Fair Isaac Inc. was the first company that developed credit scores using statistical analysis. It used the FICO scoring method to arrive at these scores. It then promptly licensed FICO to all the 3 credit bureaus which went on to develop their own versions of the classic FICO scoring method. Around 2005, all 3 credit reporting agencies combined forces and began developing the VantageCredit scoring method.

FICO scores are widely used by lenders to review risk and credit-worthiness of borrowers. Ever since it's inception, its use has become prevalent among the credit bureaus and lenders alike. Frequently you'll notice that the credit report score you get from any of the credit reporting agencies differs from the one used by the lender. This is because there are at least 5 variations of the classic FICO scoring method.

The standard FICO scoring method uses a scale running from 500-850 to judge consumer credit behavior. A score of 650 or above is perceived as a good score, above 750 is excellent and below 550 is awful.

The factors which determine your credit score are payment history, total amount owed, length of credit history, new inquiries on your account and kind of credit utilized. The higher the score, the lower the risk involved. Lenders may check the credit scores and reports by the 3 credit bureaus but alternatively may also develop their own FICO scores.

You are entitled to a free copy of your credit report from all the 3 credit bureaus. However, this report does not include your credit report score. You'll have to purchase one for a price and you can get one from companies other than FICO. So this makes matters all the more puzzling.

The "TrueScore" is one that is developed and sold by Transunion through its affiliate website www.TrueCredit.com. Even Experian sells its own FICO score called the "PLUS" score. You can also log on to www.myFico.com and get your credit score from all 3 credit rating agencies. Truth be told, these may differ significantly from the ones used by mortgagers and lenders.

Transunions Truecredit monitoring system gives you scores and reports from all the 3 credit agencies (Transunion, Experian, Equifax). You get notified via email of any changes to your credit report within 24 hours. It also has a "Trends" section that displays trends over a period of time covering seven aspects ranging from Available Credit" to "Total Debt". All this is available for a fee of around $15 per month.

In March 2006, all 3 credit bureaus jointly launched the VantageScoring Model. While this model is similar to the classic FICO model, there are also some deviations.

The VantageScore point system ranges from 500 to 900 with each 100 point section related to grades from A to F, A depicting the lowest risk category. Here, weightage is given to factors like payment history(32%), utilization(23%), balances(15%), depth of credit(13%), recent credit(10%) and available credit(7%).

It was reported that several lenders favored the VantageScore system. But there are many lenders who are somewhat reluctant to embrace this model since they have to modify their existing systems and design new ones to adopt the VantageScore model.

The credit reports and scores obtained by using FICO, True Credit and Vantage Scores are by and large similar with a few differences. The credit scores you get using each of these systems may vary by about 5 points give or take. So if you were confused before, you now know why these dissimilarities arise.