Lately I have been writing a lot about the importance of your credit score and how you can improve your credit score. Many businesses use it to track our financial transactions and determine where we fit into their umbrella. With the increased reliance more people are becoming aware of their credit score and what it means to them. This increase in the interest into credit scores has created a market worth billions of dollars. With this sizable amount of money up for grabs, it is not unthinkable that companies would fight to get our business. The problem with messing with the credit score market is that so many businesses use this information that changing it or creating new suppliers is confusing to the consumer. In most cases you have to pay to get access to your credit score. But you are not always getting what you think you are paying for.

VantageScore is a competing credit score to your FICO score.  Fair Isaac and Company makes a mint providing credit scores to millions of businesses and banks.  Experian wanted to get a piece of the pie, so they created their own version.

The VantageScore is a number between 500 and 990.  Here are the following grades and the meanings for each of the grades.

• A (901-990) - This is called the "Super Prime" grade.  This group consists of the top 11% of scorers.  They will get the best rates and terms on loans.
• B (801-900) - This is called the "Prime Plus" grade.  Consumers in this grade are in the top 40% of consumers.  Banks will offer good rates and terms.
• C (701-800) - This grade consists of the top 60% of consumers and is called the "Prime" grade.  Most people fall into this group and get average rates and terms on loans.
• D (601-700) - This grade is called the "Non-Prime" grade.  We have all heard of the sub-prime mortgage crisis.  Those consumers would fall into this grade.  They are considered to be high risk applicants and will have to pay substantially higher rates.
• F (501-600) - The last grade is for the "High Risk" consumers.  This group consists of the lowest 19% of consumers.  It is very hard for anyone in this group to get a loan.

As you can tell this is a completely different scale then the FICO scale.  Competition is always a good thing in business.  We get lower prices and better products and services in return; however, in this case we are getting a lower quality product.  By creating a second credit score, consumers must now try to understand two different scales and keep track of both scores because you don?t know what businesses or banks use which system.  There is no conversion from one to the other, so both must be used mutually exclusively.  This is not good for consumers.

Not everything is bad about the VantageScore.  The formula behind the FICO score is a closely held trade secret.  The Vantage Score provides a base on what percentage of your history is used to calculate your score.

• Payment History - 32%
• Utilization - 23%
• Balances - 15%
• Depth of Credit - 13%
• Recent Credit - 10%
• Available Credit - 7%

That show a completely different methodology from the FICO Score, which you can read about at 6 Simple Steps to Increase Your Credit Score.

To compete with the Vantage Score, Fair Isaac and Company (FICO) have created a new scoring system called FICO 08.  This new score has the same range as the old system (300 ? 850), but uses a different formula.  Part of the formula has been released and is as follows:

• Payment History - 35%
• Amounts Owed - 30%
• Length of Credit History - 15%
• New Credit - 10%
• Types of Credit - 10%

These changes are supposed to reduce defaults by 5 to 15%.
 

Now having three separate systems, consumers don?t know what to use. You need to be aware of these changes and make sure you know what score you are getting before you go get a loan. This can greatly affect your strategy on getting the best deal. For example, if you get your credit score and comes back as 750, you might be pretty exited using the FICO scale because that is a really good score. But on the advantage scale that would be a C, which only puts you at an average score. So next time you get your credit score, make sure you know what system it is from so you can properly judge how good it is and know what methods you will need to employ to raise your credit score.