How are Credit Scores Calculated
The credit score is seldom the same from all three credit reports, as each bureau uses a different credit rating system under different trade names. The Equifax system is known as Score Power, while Experian uses a system called the PLUS score. Other common scoring systems include the following:
FICO scores: The most commonly used system is the FICO score, which was developed by the Fair Isaac Corporation. FICO scores are especially popular among mortgage lenders. The scores range from 300 to 850, with a score of 680 or more generally considered as desirable. Fair Isaac offers scores for three types of credit: consumer credit, mortgages, and car loans. A person’s FICO scores can vary by as much as 50 points for each credit category. The myFICO website (myfico.com) offers resources in calculating and obtaining FICO scores and what is a good credit score under this system.
VantageScore: VantageScore was developed in 2006 by the three credit bureaus as an attempt to rival the FICO system. VantageScore ratings range from 501 to 990 and are classified into six letter grades from A to F. The system eliminated discrepancies in mathematical calculations, but there may still be differences in reported information.
NextGen: NextGen is adapted from the FICO system and uses a very similar mathematical model. Usually, a good credit score obtained using FICO ratings also applies to NextGen. Although not as popular as the FICO score, some creditors use NextGen or accept NextGen scores as alternatives for FICO.