FICO and Vantage Score

 In Credit Report

The revolutionary concept of the FICO credit score was not used until its creation in the 1950s by William Fair and Earl Isaac, when large department stores required a method of supporting lending decisions that they were making at the time. By the late 1970s to early 1980s, the majority of the major financial institutions were also using the credit score following its endorsement for use in home mortgage lending by Fannie Mae and Freddie Mac.

What does FICO Mean?

William Fair and Earl Isaac created a company called Fair Isaac Corporation (FICO), in which a mathematical model, together with a computer, was used to depict consumer lending risk. Fair and Isaac’s system predicted a consumer’s risk of being 90 days late on their account sometime within 3 years from the point of the check.

In 2001, California passed a law giving consumers the ability to see their credit reports in their entirety, something not allowed prior to 2001. Also around 2001, FICO developed scoring models for individual credit bureaus that were specifically customized to each bureau. The three credit bureaus are known as Equifax, Experian and Trans Union. These scoring models are in use by those bureaus to this day.

In 2006, the credit bureaus decided that they wanted more for themselves and announced that they would be designing their own scoring model; which would be called Vantage Score. The ultimate goal of the bureaus is to eventually have lenders replace the FICO score with the Vantage Score. Right now the Vantage Score is only offered on the credit monitoring sites owned by each bureau.

What Are The Differences?

Significant differences exist between the two scoring models. FICO’s scoring scale ranges from 350-850, but the Vantage Score ranges from 500-990. Consumers need to be very careful that they know which scoring model they are using so that they do not mistakenly think their credit score is better than it might actually be. What might be a great score with FICO could be a terrible score with Vantage simply because of the 140+ point difference.

If you have any questions regarding your credit score and how to check it for accuracy, feel free to contact us.

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