Ever have this happen?: you pull one credit score and you get say, 667 and then you pull it again from another bureau and get 573. Has something gone terribly wrong with your credit rating since you first pulled your report? Or have the agencies got you pegged all wrong? The answer is likely neither nor. The reason for this discrepancy: there are (at least) two major scoring methods that agencies use to give you your score.

Most consumers are familiar with FICO and its more recent iteration, the FICO 08. FICO has been around much longer than its competition, VantageScore, and is used by more lenders and agencies. VantageScore was created in 2005 as a joint venture between Experian, TransUnion and Equifax and FICO is owned and implemented by Fair Isaac Corporation.

The Differences

So, there are a few key differences between FICO and VantageScore. They are:

Scale

FICO scores fall between 300 and 850 while VantageScore ratings range between 501 and 990. So, if someone ever tells you that they have a FICO score over 900, they are likely mistaking it for their VantageScore (though they do have excellent credit no matter how you slice it). For FICO scores, 750 is supposedly the magic number that lenders look for, while with VantageScore, being above 801 puts you in favorable range.

Letter Grading

FICO gives it to in straight up numerals, but VantageScore aims to give a little more insight by assigning you a letter grade. The breakdown is as follows:

• 501 – 600: F
• 601 – 700: D
• 701 – 800: C
• 801 – 900: B
• 901 – 990: A

You can see a more colorful version of this breakdown at VantageScore’s website.

Usage

Obviously, you can get your FICO score and VantageScore directly from MyFico and Experian, respectively. However, most of us will be getting our credit reports through AnnualCreditReport.com, where you can buy your credit score from each of the three credit reporting agencies. When you order through AnnualCreditReport.com, you get your FICO score from Equifax and VantageScores from Experian and TransUnion.

Oddly, you cannot get a FICO score at all from Experian.

But wait, I thought credit scores were free…

Not true. Only your credit report is free, according to Federal law, and you only get one pull from each agency a year. In some circumstances, such as if you were denied a loan or are entitled to a free credit report through state law, you can get another free credit report. But in no circumstance will you get a free credit score, which is not included on your report. Your credit score is derived from the information on your credit report by applying either the FICO or VantageScore formula.

There are ways to get a free credit score, such as signing up for a free trial at SmartCredit, but you’ll have to be sure you don’t accidentally sign up for any subscriptions and cancel your account right away, otherwise you’ll get dinged with bills. Check out our tutorial on getting your actually free credit score from SmartCredit, if you’re interested.

Scoring Differences

VantageScore was developed in an effort to create greater consistency across the three reporting agencies by applying the same formula to calculate the credit score. However, there still will be slight variations. That’s because, although the bureaus do use the same formula, they will have different information on file for you. Each reporting agency has its own, unique file on you and there may be some accounts and items that appear on your Equifax report but not on your TransUnion report. That’s why it’s a good idea to pull all three and compare.

Cutting You Some Slack

One perk of the VantageScore is that it takes into consideration your demographic. For example, FICO docks you for having a short credit history and low credit line regardless of whether you are 65 or just out of college. VantageScore, on the other hand, says this on their website:

VantageScore first groups consumers into one of 12 homogeneous segments and then calculates the consumer’s VantageScore within the segment. Each population segment is defined by a combination of characteristics and score. This facilitates population stability by segment and reduced score volatility due to the multiple characteristic compositions. VantageScore identifies the ‘best of the worst’ in each segment and the segment IDs are provided to lenders with the consumer score, enabling lenders to determine consumer credit profile with more specificity.

Kind of confusing, but basically, what it’s saying is that they’ll take into consideration the fact that you are a poor college student when determining your creditworthiness.

Lenders

In spite of all that, FICO remains the go to score for most lenders. They’ll likely look at your FICO score when assessing you for a mortgage, though occasionally VantageScore will be used for a Home Equity Line of Credit or auto loan. And, of course, if a lender pulls your score from Experian, it will be VantageScore.

So, in summary, there are two major types of credit scores: FICO and VantageScore. And really, there is no such thing as a free credit score, at least not in the same way there are free credit reports.

Photo by vsmoothe

Related posts:

1. Everything you wanted to know about Fico Scores*
2. Your FICA Score: What you need to know
3. A Step-By-Step Guide to Getting Your (Actually) Free Credit Report without Accidentally Signing Up For Extras: Part Two – Experian
4. How Your FICO Score Impacts Your Life
5. The MYC Link Roundup: Free Credit Scores, Debit Trends and More