Its no secret that your credit score affects every aspect if your financial life. Your three digit credit score impacts your mortgage interest rate, your ability to secure low interest credit cards, and possibly even your ability to land that great new job youve been eyeing. Your credit score is like your financial DNA that identifies you as a person who is a high credit risk or not.

One of the more popular companies that calculate your credit score is the Fair Isaacs Corporation (FICO). The number or credit score they calculate is known as your FICO credit score, based on a mathematical formula they have developed. The average consumer credit score is 677. Only about 11% of the surveyed population ranks above 800; 29% ranks between 750 and 799. There are more than 30 million people in the United States with credit problems severe enough to score under 620, making obtaining loans and credit cards at reasonable interest rates difficult (subprime).

The Fair Isaac Corporation is different from the three major credit bureaus, Experian, Transunion and Equifax, in that, Fair Isaacs only business is to calculate credit scores and sell them to consumers and lenders. They have pushed to the top of this industry and have high name brand recognition in the profitable business of selling credit scores to lenders who want to lend us money. At the same time, the big three credit bureaus compile and sell credit reports but also calculate and sell their own version of our credit scores. Each bureau has developed their own name for their credit score as well. At Equifax, your credit score is known as the Beacon credit score. At Transunion, its called Empirica. At Experian, it goes by the name of Experian/Fair Isaac Risk model. Confused yet? In addition, these credit scores are likely to all be different numbers with each company if you were to check your score with each individually.

The Vantage Score

So, do we really need another three digit number that describes a consumers credit risk to lenders? Apparently Experian, Transunion and Equifax think so. They have announced this week that they are producing a more consumer friendly credit score designed to be more understandable to the industry. But is it really and who really benefits from this change?

Here are some facts to consider. Apparently Experian, Transunion and Equifax are all going to drop their individual former names for the credit scores and now all are going to be known as a Vantage credit score. At first I thought, what a great idea, now consumers will have one Vantage score that represents the credit score from Experian, Transunion and Equifax. Consistency will occur across the board at last! Wrong. Thats not the case at all. Each major credit bureau will still individually calculate a consumers credit score and sell it to the financial world. These credit scores are still likely to be different numbers with each company if you were to check your score with each. The only thing they have changed is that the three bureaus have agreed to call their credit score numbers the new Vantage score number.

So basically what we have here is a name change and a repackaging of an old product. Sounds like a huge buzz generated to give new focus on an old product that has a shiny new bell and whistle attached. Now to make it even more confusing, Experian, Transunion and Equifax have decided to interpret their credit scores by using a scale they have created which is different than the industry norm. Prior to this week, a consumers credit score was interpreted as shown immediately below. Compare below that the way the Vantage score will be interpreted.

FICO CREDIT SCORE

(Range is from 300-850)

720+ Excellent

680719 Good

640-679 Fair

599-639 Poor

VANTAGE CREDIT SCORE

(RANGE IS 501-990)

901-990 = A

801-900 = B

701-800 = C

601-700 = D

501-600 = F

As you can see, consumers having a perfect FICO credit score, say 850, would only be considered to have B credit under the Vantage scoring system. Obviously, the adjustment has to be accounted for but why do we need to create more confusion with such a highly important number for consumers. So who really benefits here?

So there you have it. You are know up to speed. Analysts expect it to be about six months to a year to see whether or not this new change will take off and how it will impact the industry. For now, just remember the importance of your credit score no matter which scale is used to interpret it.