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Comparing Your Many Credit Scores
Credit scores make the financial world go round, or so the saying goes. And while that may be a slight exaggeration, the truth is that your credit scores are going to have a significant impact on your money.
Lenders rely on your credit scores to decide whether or not they want to do business with you and under what terms. Insurance companies rely on scores to help them determine how much to charge you for your insurance premiums. Even utility and mobile phone providers will use your credit scores to determine whether you’re eligible for service and, if so, how much you will have to put down as a deposit (if one is required) to open a new account.
When it comes to the subject of credit scores, there is a lot of confusion among consumers about just how many credit scores actually exist. Many consumers mistakenly believe they have only one credit score. Others will swear they have three credit scores. However, both of the previous assumptions are completely wrong. The truth will probably surprise you: You actually have hundreds of different credit scores.
What Is a Credit Score?
Hearing that there are hundreds of credit scores may feel a bit overwhelming, but once you understand more about credit scores, the easier it is to digest the revelation.
Credit scores are used to evaluate the information contained in your credit report and translate it to an easy-to-use number. The number, your credit score, is then used by lenders and other companies who may wish to extend credit to you (i.e. lenders, landlords, insurance providers, etc.) to help them make more informed business decisions.
Credit scores help lenders predict whether or not you’re likely to pay back your debt according to the terms of your agreement. FICO and VantageScore credit scores, the most common brands of scores, have a stated design objective of determining how likely you are to become 90 days late on any credit obligation within the next two years. The more likely you are to actually become 90 days late on an account, the lower your FICO and VantageScore credit scores will be.
Different Credit Score Brands
The majority of lenders currently rely on the FICO brand of credit scores, but that’s changing with the introduction of the VantageScore brand. And although many people use the term “FICO score” as if it were synonymous with “credit score,” that’s not the case.
Think of the term credit score as a category of products… like cereal or soft drinks. Within the category of products there are brands… like Cheerios and Coke. And even further down, within the brand, there are variations of the brand — like Honey Nut Cheerios and Diet Coke.
So, whenever you hear people use the term “credit score” or “FICO score,” they’re really referring to a brand or type of product, and not a specific credit scoring model.
Different Varieties and Generations of Credit Scores
Just like Ford does not make only one type of vehicle, neither does FICO or VantageScore make a single credit score. And, just because Ford makes a 2016 Mustang, that doesn’t mean that all Mustangs are from 2016.
Now apply this understanding to credit scores and you’ll be well on your way to understanding why you’ve got so many.
Because FICO has been around for so long (the first FICO credit bureau score was introduced in 1989), there are going to be more generations of their scoring models than any other brand. Every few years FICO releases a new generation of their credit scores, but that doesn’t mean the older versions are shut off. To the contrary, the older versions are still maintained and commercially available, and used by lenders.
What ends up happening is that these multiple generations of scores pile up, and that’s the primary reason why you don’t have just one credit score. In fact, under the FICO brand you have dozens of scores.
Under the VantageScore brand you’ve got nine different scores, which is made up of three generations of their scoring model times the three big credit bureaus. And while their scoring model is the same across all three credit bureaus, your scores are not likely to be the same — because your credit reports will likely be different. Different data in means different credit scores coming out.
What Can I Do About All These Credit Scores?
First and foremost, you can stop worrying about it. You’ve got more credit scores than you’ll ever see, and there’s nothing you can do about it. And even if you did have access to all of your credit scores, there’s no reason to believe you’d be able to max out each of them, because they all consider things differently.
For example, newer credit scoring systems ignore collections that have a zero balance. But, the older generations of credit score models do not ignore zero-dollar collections.
What you can do, however, is make sure the information on your credit reports is 100% accurate.
All credit scores consider the information on your credit reports — nothing more and nothing less. And because you have only three credit reports, making sure they’re all accurate and impressive is a whole lot easier than chasing around dozens of different credit scores.
If you’re able to keep really great credit reports, then each and every one of your credit scores is also going to be great, regardless of the brand or generation of the specific score.
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John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. He has written four books on the topic and has been interviewed and quoted thousands of times over the past 10 years. With time spent at Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.