University of Wisconsin - Extension

NEILLSVILLE, Wis.—There has been a great deal of focus lately on having a good credit score. Credit scores indicate whether you are a good credit risk and afford you access to low interest credit, says Gayle Rose Martinez, Clark County University of Wisconsin-Extension family living educator.

Despite the importance of credit scores, there is variation among the scores calculated using information from the three major credit reporting agencies—Equifax, Experian and TransUnion. How can this be? According to Rod Griffin from Experian, “There are many different formulas used to calculate credit scores depending on the use of the score.” The other reason the scores vary is that each reporting agency has different information.

Most consumers are familiar with generic FICO scores developed by Fair Isaac Corporation, a company that specializes in developing credit scores. Fair Isaac used three different formulas and three different sets of information taken at different times when they created the FICO score for Equifax, Experian and TransUnion. Because separate formulas are used for each credit reporting agency, there are differences in the scores calculated using credit reports from the individual agencies.

The credit reporting companies have partnered to create a new credit scoring system to address this problem. The new VantageScore uses a single formula for all three credit reporting companies, generating more consistent scores among the agencies. With the new formula, the scores will still vary because the information gathered by the three agencies is still inconsistent.

Griffin went on to say, “What’s important for consumers to know is that it’s not the score that is the most valuable but the information that comes with your score.” When you get your credit score from Experian you will also receive a report that tells you what you need to do to make your score better. For example, it could say, “balance on credit cards too high,” or “late payments on credit history.” It is this information that will help improve all credit scores no matter what kind of scoring system is used.

At this time Experian is the only credit reporting agency through which consumers can access their VantageScore, which can be found at http://www.vantagescore.experian.com.

For more information on credit scores and to learn more about family financial management, contact your county UW-Extension office.