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Credit scores are confusing, and it's not an accident. The credit scoring companies keep their formulas closely guarded, so there's no way for the general public to know what's exactly in them. To make matters worse, there are multiple credit scoring companies, each with several different formulas that can be applied to the data from any of the three major consumer credit bureaus.

What is a credit score?

A credit score is a number designed to represent a person's likelihood of repaying a loan. Lenders purchase the credit scores of consumers who apply for a loan, and they use this information to approve or deny the loan, and if approved, to help decide what rates and terms the applicant will receive.

A credit score is created by using a proprietary credit scoring formula from data from one of your credit histories obtained by a consumer credit bureau. Before credit scores became widely used, a lender would have to hire people to read through each applicant's credit history and offer their opinion on the applicant's creditworthiness. Needless to say, this was a very expensive and subjective process, and one that was open to potential discrimination.

How are FICO and VantageScore different?

While many people might think that they have just one credit score, they will likely have dozens of possible scores. That's because there are two major consumer credit scoring companies, FICO and VantageScore, and each one offers lenders numerous versions of their credit scoring formulas for different purposes, such as credit cards, vehicle loans and mortgages.


  • Stands for Fair Isaac Corporation.
  • Began producing credit scores in 1958.
  • Provides the majority of credit scores to lenders.
  • The latest FICO scoring formula is FICO 9


  • Created in 2006 by the three major consumer credit bureaus.
  • Has been steadily increasing its market share.
  • The latest VantageScore product is version 4

The way that FICO and VantageScore compose their formulas are somewhat different. For example, you likely won't have a FICO score until you've had one credit account, known as a tradeline, open for at least six months, while VantageScore may be able to produce a credit score before then. And since 2017, VantageScore began weighing tax liens less heavily, while FICO did not. And the latest VantageScore formula also incorporates so-called trended data, which is are patterns of behavior, such as when a consumer is steadily paying off their balances over time.

Having competition between credit score providers is good for consumers and businesses alike, as these companies are constantly refining their formulas to better predict a borrower's creditworthiness. However, lenders are free to use earlier formulas that are still offered by these companies. Thankfully, both these companies now use a similar scale 300-850, with the higher scores representing greater creditworthiness.

Furthermore, each score could be based on your credit history from one of the three major consumer credit bureaus, Experian, Equifax and TransUnion. If the information collected by one of these companies is different from the other, the score produced from it will naturally be different.

How your credit score affects you

If you're a lender, such as a bank, a mortgage company or a credit card issuer, then obtaining the best possible credit score is vital to your business. If your job is to loan out vast amounts of money, accurately predicting who is most likely to pay back the loans can help you to offer the most competitive rates while minimizing delinquencies and defaults. Using one scoring formula that's slightly better than another can make a huge difference in your profit margins

But for most consumers, which credit score you see isn't of much consequence. That's because the three major consumer credit bureaus will often be relying on the same data from the credit bureaus. The two major credit scoring companies are applying that data in a similar way, in an attempt to discern the exact same thing - how likely it will be that you will repay your next loan. If you want to know which credit score your lender is using, you can feel free to ask, and most lenders will be happy to provide this information.

What you need to know about credit scores

For most consumers, viewing their credit score is a great way to confirm that they're maintaining or improving their credit history. But viewing your credit score can also be a vital way to identify a problem with your credit before it directly affects you. And perhaps the most important reason to know about your credit score is to figure out where the problem came from if there's something wrong.

If you spot a sudden drop in your credit score, you'll want to know which credit bureau that it's drawing data from, Equifax, Experian or TransUnion. Then, you'll want to quickly request your credit history from that company. You'll be looking for potential problems such as new lines of credit that were fraudulently opened in your name, or missed payments that you weren't aware of. And while it's possible that the problem could only exist in your credit history in just one of the three major consumer credit bureaus, it's a good idea to check out all of them. Thankfully you're entitled to a free credit history through annualcreditreport.com.

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