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Credit Scores That Matter

Credit scores can be confusing enough without having to worry about whether the score you just purchased is a "real" credit score. Major Credit Reporting Agencies (CRAs) unfortunately add to the confusion by not making it very clear that most of the credit scores sold through their websites will never even be looked at by a lender.

If a score isn't one a lender would ever use, then of what worth is it to you? Not much, really. And it's certainly not worth paying for when you can get free estimates of your credit score all over the Internet. If you're going to pay for a score, then you want to be sure you're buying one that matters.

So what is a "real" credit score that matters? In short, it's a score lenders will actually consider when determining such things as how much credit to offer you, at what interest rate, and under what specific terms or conditions. And while there are quite possibly thousands of different credit-scoring formulas used by lenders to generate various types of credit scores, one certainly stands out above all the rest—the FICO model.

Based on a credit-scoring algorithm the Fair Isaac Corporation first developed in the late eighties, the FICO score remains the 800-lb gorilla in the industry and is frankly the only score you should worry about when applying for new credit. If a lender mentions your credit score, chances are they're talking about your FICO score. But don't let yourself get confused by the different names they may use. Your real FICO score actually does have several names by which it's known.

The following provides a breakdown of not only all the FICO scores you need to be aware of, but also a few other credit scores you should at least acknowledge are in existence. Acknowledge—yes. Pay for—no!

FICO Scores

You have three Classic FICO scores—one for each CRA. They're based on a scale of 300-850, and the CRAs compute the scores using the data compiled in their respective credit reports. Since an individual's credit reports from different CRAs are rarely identical, the scores often vary as well (sometimes by as much as 100 points). They even have the following different names:

BEACON: Equifax's FICO score

EMPIRICA: TransUnion's FICO score

Experian/Fair Isaac Risk Model: This is a no brainer, but the catch is you can't even buy your Experian-based FICO score anymore. As of early 2009, Experian terminated part of its relationship with Fair Isaac and stopped selling FICO scores to consumers. Lenders, on the other hand, can still buy them.


Equifax, Experian, and TransUnion also teamed up in 2006 to create a credit score that could compete with FICO. The result of their efforts was the VantageScore, which is based on an entirely different scale of 501-990 and assigns an alphabetic score of A, B, C, D, or F to consumers as well.

You can currently purchase your VantageScore from certain CRAs, but it really hasn't caught on yet with lenders like the CRAs hoped it would. The vast majority still rely on the Classic FICO score as a fundamental part of their underwriting processes. However, it's always a good idea to ask potential lenders which scores they will use before making any credit score purchases. It's possible some may even consider both.

Generic Credit Bureau Scores

In addition, each of the CRAs has its own credit score, commonly referred to as "generic" scores. For example, Experian's Plus Score is not a true FICO score, but it is based on your Experian credit report and Experian's own in-house scoring model. This is the score they want to sell you now that they no longer provide access to your Experian-based FICO score.

The problem is lenders won't use generic scores to assess your credit risk as a borrower. Therefore, you shouldn't waste your money paying for one. If it's provided free of charge with another product, then that's fine, but these types of scores should only be used to help give you a general idea of what your real FICO score might be.

When you're ready to pull your real credit score, purchase it directly from myFICO.com.

on Tue, 2010-03-30 17:00