Do I Really Have Three Credit Scores?
Each of the three credit reporting agencies house and maintain more than 200 million consumer credit files. The vast majority of those credit files are what’s referred to as “scoreable.” This means they meet certain minimum criteria set forth by the credit score developers in order to support the calculation of a credit score.
For example, in order for you to have a FICO score your credit file must have at least one undisputed trade line (account) that is older than six months, one undisputed trade line that has been updated in the past 6 months, and no deceased indicator on your credit file.
One account can satisfy those first two criteria. So, if you opened a Discover credit card five years ago and it was just updated in your credit file last month (and you’re alive) then your credit file will be scoreable under the FICO system.
The minimum scoring criteria for VantageScore is very different. In order to qualify for that type of score, the consumer’s credit file must have at least one account that has had some sort of activity in the past two years, this according to VantageScore Solutions, LLC.
And while most of us focus on FICO as the dominant credit score on the market with VantageScore providing their main competition in the “credit bureau score” space, that’s hardly where it ends. In fact, you’ve got so many more scores that if I tried to name all of them and explain what each of them do your head would spin and I’d run out of paper. But because I never shy away from a credit related challenge, here’s an abbreviated version…
FICO is not only a score type but it’s also a brand. It’s kind of like saying, “Coke”, which is an actual soft drink and also a brand representing a long list of soft drinks. FICO builds a large variety of scoring systems, but we’re generally just focus on their core product, their credit bureau based risk scores or “FICO” scores.
In addition, FICO also builds bankruptcy scores, revenue scores, industry specific variations of their FICO credit risk scores, attritions scores, response scores, transactions scores, medical adherence scores, collection scores, behavior scores, application scores, small business risk scores, fraud scores, insurance risk scores…and the list goes on and on.
Each of these scores has various “generations” (or versions) that may still be available to lenders and other industries. The raw number of score options is truly mind-boggling. According to Craig Watts from FICO, “By our count, U.S. lenders and other businesses used roughly four billion FICO scores last year that were calculated from precisely the same scoring models used to calculate the scores that myFICO.com sells.” To put that in perspective, that’s only one version of their FICO risk score and NOT all of those other abovementioned scores.
VantageScore Solutions builds a credit bureau based risk score and is currently on version 2.0 of that scoring system. They do not build other types of scores but their core product, the VantageScore, is gaining some market share.
Equifax, Experian and TransUnion
All three of the credit reporting agencies have a long history of developing scoring systems. Collectively they build risk scores, collection and recovery scores, insurance scores, bankruptcy scores, and many more.
Lenders, Insurance Companies and Utility Providers
Most large lenders, insurance companies and utility providers use credit scoring systems. And, many of them are homegrown, meaning they were custom built for use by one company. Point being, they’re each going to have their own suite of scoring models, which multiplies the total number under which you could be scored.
So now that you know this…how many scores do you have? The answer is simple…you don’t know. But, what we do know is that you can be scored under each of the scoring systems I mentioned, which likely brings the number into the hundreds.
When I was working for FICO one of my job functions was to go out and speak about credit scoring at various credit industry related events. I was almost always the least popular guy in the room because of my subject matter. This was true on all but one occasion when a credit card risk manager from one of the mega banks joined me as a panelist for a score discussion. He told the crowd that his bank scored their customers, on average, over 60 times each year using a variety of different types of scores. For the first time in a long time, I was no longer the least popular guy in the room.
Keep in mind that this was one bank, not all banks. Now multiply his number of 60 by the number of credit cards in your wallet. That will give you a better indication of just how often you’re being scored each year. For those of you who think you understand credit scoring, you’re just scratching the surface. So the next time you hear someone telling you that “your score is X”, you’ll know better.
John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow John on Twitter.