What Are FICO
Score, VantageScore,
Beacon and an Empirica Score?
Part 16:
As part of series of articles (blogs)
regarding Credit and Credit Score, here we
go:
Disclaimer:
Every effort has been made to make these
articles as complete and as accurate as
possible, but no warranty or fitness is implied.
The information provided is on an “as is” basis.
The author shall have neither liability nor
responsibility to any person or entity with
respect to any loss or damages arising from the
information contained in this book.
The author is not engaged in professional
services. If professional advice or other expert
assistance is required, the services of a
competent professional person should be sought.
What Are FICO
Score, VantageScore,
Beacon and an Empirica Score?
What is a FICO Score?
FICO is named for the Fair Isaac Corporation.
FICO score analyzes a person's financial history
to derive a number showing that person’s credit
worthiness.
The Fair Isaac Corporation introduced the
formula for the FICO score in 1970. It took
almost 12 years for the founders of the company,
mathematician Earl Isaac and engineer Bill Fair,
to write the formula.
FICO score was “invented” in the 1970 and has
become the mortgage industry standard for credit
ratings. FICO score, currently, is the most
established and well-respected score among
lenders.
None of the other credit reports, however, are
particularly relevant in the home-buying
process. This is because the nation’s Mortgage
lenders rely on the FICO model.
Today, FICO score is omnipresent to the point
that people generically refer to all
credit scores as “FICO score”.
FICO score range from 300-850 and is
derived from categories shown below.
·
Length of credit history (15%)
·
Payment history (35%)
·
The Ratio of Total Debts/Total Line of available
credits (30%)
·
Number of Inquiries (10%)
·
Types of credit (10%)
What is a
VantageScore?
There are three main credit bureaus in the
United States. They are Equifax, Experian and
TransUnion. Each offers lines of credit-scoring
products, available for purchase on their
respective websites. Prices range from “free for
a short trial period” to several hundred dollars
per year.
VantageScore
was originally developed in year 2006 by the
three major nationwide credit agencies, Equifax,
Experian and TransUnion, on a range from
501-900.
There was no direct or linear translation
between VantageScore and FICO score. This has
created confusions for some consumers,
especially those who were used to FICO score on
the range of 300-850.
Finally, in March of 2013,
three main credit bureaus in the United States,
Equifax, Experian and TransUnion,
introduced VantageScore 3.0 in the direction of
making credit scores easier for consumers to
understand, as it abandoned the score range of
501-990 it has used since inception. With its
new 3.0 model, VantageScore 3.0 has adopted the
range of 300-850, making it consistent
with the score range long held by FICO scores.
VantageScore 3.0 also produces scores for
consumers who:
-
Weren’t using credit often but did use it in
the past 24 months. VantageScore
requires only one month of history and an
account reported to the agency within the
past 2 years.
-
Have no open accounts. These are often
consumers who fall into the “subprime”
category such as those who have been through
bankruptcy and subsequently stopped using
credit, or those whose only listed accounts
are collection accounts or other negative
information.
-
Show no recent activity at all on their
credit reports. The last information
reported about them may have been 3 – 4
years ago. “These consumers are relatively
good quality,” Davies notes. “71% have a
credit score of 600 or higher. They have few
delinquencies and have had accounts for a
long time but don’t use them much.”
The three credit bureaus score now on a range
from 300-850
What are a Beacon
and an Empirica Score?
Each bureau uses a different name for its score,
even if it uses the same FICO algorithm to
generate the score. For example:
- Experian uses the term "FICO or FICO II",
- TransUnion uses "Empirica"
- Equifax uses "Beacon"
Beacon score is a number generated by the
Equifax Credit Bureau to rank an individual's
credit worthiness.
Empirica score is a number generated by the
TransUnion Credit Bureau to rank an individual's
credit worthiness.
HOW to overcome the problems with your credit
history and credit score?
Knowledge, education, awareness, practice and
discipline are the essential keys to being
successful on any subject. The book,
"Credit Score Tips and Tricks",
provides you information, tools, techniques to
educate yourself and manage your credit report &
credit score, and therefore manage your finances
effectively at no additional cost.
I have decided to bring and share with you,
chapters or sections of my book,
Credit Score Tips and Tricks,
as series of
articles here. This is the number
16 of such a
series.
I also created and manage a GROUP in ActiveRain,
Credit Reports and Credit Scores, Please
feel free to join and share your thoughts and
experiences.
