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Blogging for Change Blogging For Change
by sitecore\kmcgrigg on June 05, 2008

I did a fun interview recently for CreditCards.com warning people not to obsess too much about their credit score.  Here is an excerpt:

"People have a thing about being graded," says Kim McGrigg, communication specialist for Money Management International. Now that we can check our credit scores as often as we want, it's easy to worry too much. Some people even get competitive. McGrigg tells about a man who recently asked her why, despite the most strenuous efforts, he couldn't get his score above 812! (The average credit score is closer to 700.)

While the article contains decent advice, I might not have been as clear as I could have been.  You see, I was referring to FICO scores that are offered by the Fair Isaac Corporation.  Until a few years ago, FICO was “the” credit score.  But in 2006, the three major bureaus (Equifax, Experian, and TransUnion) developed their own credit rating product called VantageScore.

Consumers do not need to be too concerned about the fact that there are competing scoring products—after all, the basic rules of establishing good credit still apply.  However, to avoid confusion, it is helpful for people to understand that there are some differences between the models. 

One difference between the scoring models is that FICO’s scale ranges from 300 to 850, while the VantageScore goes from 501 to 990.  For example, a FICO score over 700 is generally considered “good,” while a VantageScore in the 700s barely grades as a “C.”

Another difference is the way the scores are calculated.  Following is a comparison of the variables.

Vangage ScoreFICO Score
Payment history 32% Payment history 35%
Utilization  23% Amounts owed 30%
Balances 15% Amounts owed 30%
Depth of credit 13% Types of credit 10%
Recent credit 10% New credit 10%
Available credit 7%  

You can purchase your FICO score from a number of places including MyFico.com.  VantageScores can be purchased from the bureaus.  If you’d like to save yourself a few bucks, try a free FICO Score Estimator from Bankrate or MSN.  And don’t forget that you are entitled to one free annual credit report from each of the three bureaus.  To order your free reports, visit AnnualCreditReport.com

I know how important (and confusing!) credit scores can be, but I stick by my recommendation to keep it in perspective. As I said in the article, "No one's obituary should ever read, 'Stan was well respected by all three major credit bureaus.' "

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