Credit Score and Its New Computing Model

Some US credit consumers have recently found themselves confused after purchasing their credit scores at one or all the major credit bureaus - Equifax, Experian and TransUnion. Their confusion gets a vivid expression through the following question sent to us by one of our readers: "Your website puts the credit score range as 350-850; however when I requested my credit scores through TransUnion and Experian, the range was 501-990, which makes someone with a 650 credit score a poor credit customer. Is the info on your website outdated and how often do you update?"

In this article, we'll try to give a comprehensive explanation to this issue so that credit card applicants get a clear picture of their chances when trying to get a new credit card or another loan.

We have all got accustomed to the well-known and perhaps the basic scoring model known as FICO credit score. This three-digit number shows the standing of your credit report and serves as guideline for creditors in their lending decisions.

As of today, the FICO credit score range is still remaining in between 350 and 850 points and is still plying a critical role for your chances to get a new credit card However, did you ever notice that when applying for FICO scores at all the credit bureaus at once, the numbers you get are not always the same?

To be more exact, they are almost always different because each credit scoring agency uses its own computing model. Thus, you never know for sure which numbers will be inspected and considered by your next credit card provider.

For your convenience and assurance, as well as for the sake of creating a more reliable credit score model, the three credit reporting agencies collaboratively worked out a new type known as VantageScore.

VantageScore, ranging 501-990, is exactly the number that our puzzled reader was provided with. Though its range limits are considerably higher than those of the traditional FICO score, VantageScore is always the same with the three major credit bureaus, being a more predicative score for applicants and the only reliable score to use by creditors.

However, as these two credit scoring models coexist, an average credit consumer gets confused as to which score stands for good, fair and bad credit. Let's make it clear. As VantageScore starts at 501, all its points are generally higher.

Thus, if according to the FICO score, you had 789 points, which indicates to an excellent credit rating, then your VantageScore will be 916 which stands for "A" grade credit (also excellent). Have a look at the range.

"A": 901-990 (excellent credit); "B": 801-900 (good credit); "C": 701-800(fair credit); "D": 601-700 (poor credit); "F": 501-600 (no credit).

According to this model, it appears that a customer with a FICO score of 650, accepted as fair, falls in the category of poor credit customers. That's it.

You just should be aware of this new model or get accustomed to it as it is actively used by banks and other financial institutions when assessing your risk.

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