The Vantage credit score is a world apart from the FICO score. Make sure you know their similarities – and most important of all – their differences.

What is VantageScore?

Before there was VantageScore, there was FICO. Let’s talk about that first…

• In 1958 Fair Isaac Corp. created the first credit score model.
• In ’81 they created the first scoring models for credit agencies.
• In ’89 they launched the first FICO score for general-purpose.
• In a nutshell, FICO was first. It has been (and still is) the industry leader for credit scoring.

The big 3 credit reporting agencies – Experian, Equifax, and TransUnion – have to pay Fair Isaac to license their proprietary FICO scoring algorithm.  And being that FICO is the gold standard for lending/credit decisions, it’s not like they had a lot of choice… pay FICO or else.

So the 3 credit agencies decided to get together and create their own credit score model, the VantageScore, without the help of Fair Isaac:

• In March of 2006 the first version was launched. The VantageScore range is 501 to 990 (versus FICO’s 300 to 850).
• In October 2010 the second version – 2.0 – was launched. It still runs on the same score range, but (according to them) it offers “improved predictive performance.”

So this score hasn’t even been around a decade yet and thus far, lenders have failed to adapt it on a wide scale. To put things in perspective, according to FICO’s website, their scoring models are used by more than 90% of the largest lenders.

Who uses VantageScore?

That, my friend, is a good question, because it’s hard to answer!

In 2006 Fair Isaac Corp. filed suit against VantageScore Solutions, LLC alleging that they were trying to drive Fair Isaac out of the credit scoring industry. Within the 52-page court order, it’s claimed that VantageScore’s marketshare was only 5.7%.

In the years since it has gone up but by how much, it’s anyone’s guess. In 2011, Craig Focardi of TowerGroup (a financial research and advisory services firm) said on CreditCards.com that he believes it has less than a 10% market share.

Of course VantageScore, on the other hand, tries to paint a rosier picture in their press releases and the like, saying that it is used by:

• 4 of the 5 major financial institutions
• 5 top credit card issuers
• 2 of the top 5 auto lenders
• 1 of the top 5 mortgage lenders

I am not disputing that information is true, but my question is this: How often are the 4 of the top 5 major financial institutions using VantageScore vs. FICO? I believe that would give us a clearer picture as to who uses Vantage credit scores.

VantageScore vs. FICO score?

Here’s a review of the basic similarities and differences between them:

(1) Score Range

I already mentioned the different number ranges, but here’s a detailed breakdown for Vantage:

• 901 – 990 = A, Super Prime
• 801 – 900 = B, Prime Plus
• 701 – 800 = C, Prime
• 601 – 700 = D, Non-Prime
• 501 – 600 = F, High Risk

The nice thing about this range is that it’s clean and easier to understand by going on a 501 to 990 scale which corresponds to letter grades (a concept even the novice will grasp).

On the other hand, FICO does not have a neat breakdown like that by category. However for a ballpark comparison, here is what I consider the levels to be on FICO (please note these are my personal opinions only and that’s it):

• 770 – 850 = Excellent credit.
• 730 – 769 = Great credit. If you’re in range of this, you probably can get approved for the top cash back and travel reward cards.
• 700 – 729 = Good credit. This will not be good enough for some of the best credit cards.
• 640 – 699 = Fair credit. Even if you’re on the upper end of that scale, it might not be good enough to get approved for many credit cards.
• 581 – 639 = Bad credit. Some unsecured cards (i.e. department store, gas station) might be available to you, but by and large you might be stuck with secured, too.
• 300 – 580 = Very bad credit. If you want a credit card, secured will likely be your only option.

My opinions on the FICO score ranges may be more stringent than what you see elsewhere, but that’s because I’m basing it directly off of consumer feedback. For example, even though some other people consider a 750 FICO to be “excellent” I don’t feel that’s appropriate, when I hear from people with that FICO getting denied for some cards.

In my book, the definition of “excellent” means you should be able to get anything you want and in today’s economy, it takes higher scores than in the past.

(2) Components

The formulas for both FICO and VantageScore are secret, so no one can tell you exactly how they are calculated. However both companies do provide some basic information as to the general categories and how they affect your score:

For a more detailed explanation of this, check out my post about highest credit scores.

(3) Experiences

Aside from the differences in scale, is a Vantage vs. FICO score the same thing? Or is it more of an apples-to-oranges comparison?

From the experiences I have read on the forum and elsewhere, here are some theories I have:

• FICO weighs payment history more heavily than Vantage. This probably explains why it seems to be easier (as in, faster achievement) of a high Vantage versus achieving a high FICO.
• I have a friend with a nearly 22 year-long credit history, but only one open credit account and the last activity on that account was 5 years ago. His Vantage? 801 (B). With that same data set, I can’t imagine the FICO model would be so generous in calculating the equivalent of something in their “B” neighborhood. Vantage reportedly gives less weight towards current balances, which would explain why someone with a good (but not recently used) credit profile can still rank relatively high.
• FICO seems to more heavily favor having a diverse mix of both installment loans and revolving credit (i.e. credit cards). On the other hand, I have seen feedback/reviews from consumers who are only using one or the other but still have a high Vantage.
• Vantage seems to take into account your credit limit amounts amounts instead of just the debt to credit ratio (which is how some suspect FICO works). So having high credit limits might help your Vantage.
• FICO can be brutal on blemishes. However under some circumstances, Vantage seems to be more lenient with them, especially if they are not recent.

*Remember the above are theories only and may or may not be true. No one can know since the formulas are secret.

(4) Conversion

So how do you convert between the two?

Well as mentioned above, even though they’re quite similar, they don’t weigh things the same. Therefore since these are two different algorithms, a VantageScore vs FICO score conversion is not possible!

Now some people say a formula for converting between them is to multiply Vantage by 0.86 (since FICO’s top score of 850 is just about 86% of 990). Or to convert from FICO to Vantage, you multiply by 1.16 (which is 990 divided by 850). Yes, those might give you a ballpark approximation, but more often than not these formulas seem to yield drastically unexpected results.

Bottom line: It’s not like converting Celsius to Fahrenheit. We are talking about different models, each distributing the scores in a different manner. Try the conversion for kicks, but not accuracy.

(5) Distribution

So what percentage of the population has a given Vantage or FICO?

This was calculated out based off information found in this myFICO booklet (PDF) and on Experian’s VantageScore site, thanks to this post.

It may not be an apples-to-apples chart of score distribution, but it’s probably the closest possible, given that there aren’t any other ranges and percentages which have been publicly released that I am aware of.

How important (or not) is this score to you?

Admittedly, I am pretty tough on criticizing the VantageScore, but the main reason for that is because it’s not widely adapted yet. I do think there are aspects of it which are better than FICO. For example, it’s easier to understand the number ranges and I think FICO weighs diversity of credit too heavily (hey FICO… not everyone needs installment loans).

However until Vantage is more heavily used, I’m not going to pay much attention to it. Twenty years from now it might very well become the market leader… or not, who knows? But what I do know is that as it presently stands, FICO is by far the #1 player so that’s where my attention and focus will gravitate.

Jessica London, the plus size clothing store, has a credit card program that operates a bit different than most store cards. It has some unique features (both good and bad) that you should consider.

It comes in 3 levels (Gold, Platinum, Elite) and here’s what they have in common:

• No annual fee
• On orders of $100 or higher there is free standard shipping
• If qualified there is a payment deferred option for 90 days. You are a given a promotion code that you enter during checkout and with it, you agree to have your credit card account charged for the full purchase 90 days later.

Everyone starts out with the Jessica London Gold credit card. After spending $250 within a year it is converted to Platinum. If you spend $500 (and continue to spend that annually) then the account will be Elite level.

The Platinum and Elite comes with some additional benefits…

Platinum: When you signup for their emails, during the 1st Tuesday of every month you get 10% off with your credit card.

Elite: Same as the Platinum, except the discount jumps to 15% off. There is also free shipping given on that day.

The good, bad, and ugly?

Good: No fee. The 90 day deferred payment is a unique benefit and could be helpful when used responsibly. You at least get some sort of purchase discount on the Platinum/Elite credit cards.

Bad: You only get a discount 1 day out of the month. The free shipping requires minimum orders of $100+ (and that’s pathetic, when you can often find coupon codes which give you free shipping AND a discount for lower amounts).

Ugly: The interest rate is high at 24.99% (current as of time of publishing).

Verdict?

The Jessica London credit card offers little incentive. They really need to step up the rewards and benefits big time if they want more people to seriously consider the application. When you can easily Google promotion codes like this…

…why would someone apply for the Jessica London card, that only gives free shipping on $100+ orders and a discount one day per month for 10% or 15% (or none at all on the Gold card you start out at).

Other recommendations?

Here are 3 alternatives to consider:

Chase Freedom – 5% off at clothing stores for at least one quarter per year
Discover More – same as above
AmEx Blue Cash – Higher cash back for department store spending

Written Dec ’11

Try searching for “average credit score” and you are likely to get different answers from every website. Here’s why…

I just went through the top 10 listings on Google for the above term and it was alarming to see that virtually all of them were citing information that was either (a) incorrect, or (b) misleading.

The problem starts with the scores they are using…

• FICO – This is without a doubt the gold standard of credit scoring. When people talk about scores, this is what they are talking about (or at least, intend to be talking about). Unfortunately, FICO is pretty tight-lipped about it and greatly restricts its usage.
• PLUS Score – This is a scoring model developed by Experian which is geared solely towards consumers (it’s not used by creditors). Instead of running on a 300 to 850 scale like FICO, it runs on a 330 to 830 scale. It’s peddled through FreeCreditScore.com.
• VantageScore – This runs on a 501 to 990 scale. It was developed a few years ago by the major credit reporting agencies (Equifax, Experian, and TransUnion) to compete with Fair Isaac’s industry-leading FICO formula. However, VantageScore hasn’t really caught on and lenders very rarely use it.

Rather than identifying an average credit score as being a PLUS Score or VantageScore, almost all websites (even large authority sources) are using these scores interchangeably, without mentioning what type of score their data is using.

For example, one top site tells us the average credit score in the United States is 692 for FICO. Then, it proceeds to give a state by state breakdown, without specifying that they’re actually using PLUS scores for the individual states instead of FICOs (obviously not an apples-to-apples comparison).

Here’s the truth…

What is the average credit score? Well that’s really not even a question you should be asking. Why? Because those with ultra-low scores (due to a bankruptcy, foreclosure, etc) are going to have scores significantly lower – these drag down the average number big time.

If you want a better gauge of where you fit in, then you should be looking at the median credit score which is 723 for FICO (and has been reported as such for many years in a row). The median means it’s exactly in the middle: 50% of people have a lower score, 50% have a higher score. This will give you a much better idea of the credit score average for Americans.

If you still insist on knowing the current “average” then good luck on finding that out. A few years ago FICO cited the 692 figure but they’ve remained silent on what is the average ever since. Translation? FICO no longer reports the average, so there’s no way to know 100% for sure. However being that the median has remained 723 for years, I believe it’s safe to assume that the average is still pretty darn close to 692.

Average credit score by state?

Ah… so this is where it gets tricky! FICO doesn’t release a state by state breakdown of score distribution. So in order to judge their performance, we have to turn to a different scoring model unfortunately.

As an alternative, let’s use Experian’s PLUS Score. Why? Because they publish the PLUS scores by state and since they are among the largest credit reporting agencies, their sample size is obviously huge. However keep in mind they run on a 330 to 830 scale and therefore are NOT the same as FICOs. However, this information is still a good way to measure performance of states relative to each other.

As of December 2011 Experian’s National Score Index reports a 687 PLUS Score as the average in the United States. I’ve organized the data below and marked those states which are at or above average as green, and those below in red.

You probably notice that those states with the lowest average scores tend to be in the southern half of the country (both the southeast and southwest). Meanwhile, many states in the Midwest and New England have above-average.

• Nevada has the lowest credit score at 660 – that’s 27 points below the U.S. average.
• Minnesota has the highest at 718 – which is 31 points above the U.S. average.
• The spread between the lowest and highest state is 58 points.

Average credit score by age group?

Last by not least, the brings us to score distribution by age. I think my friends over at Credit Karma have the best data set available for showing average credit score by age. Although it’s not FICO, they use a credit scoring system which correlates closely – TransUnion’s TransRisk model. Like FICO, it runs on a 300 to 850 scale.

The first thing you probably conclude from looking at that is the older you get, the more your score will go up on average. There are a few reasons for this:

• Let’s be honest here… there are many people who screw up their credit during their college/younger years. It’s not ’til a few years later when they realize how much they messed up, and in turn, they finally start managing it properly (but by this time they’re older).
• Credit scores (FICO and competitors) all take into account the age of your credit history and accounts. The longer the [positive] history, the more it will help your score. This is a reason why adults who have had accounts for decades tends to have higher scores.
• Even if you never had major screw-ups with your credit as an early adult, as you get older, you [hopefully] start building up a nest egg and paying down debts like your mortgage, student loans, etc. This of course helps your score.

I would like to warn you though that you shouldn’t think you are doing good just because you are above average for your age group. Sure the average may be 638 for the 18 to 24 age group but truth be told, you can somewhat easily hit the low 700′s by the time you are 20 if you do things right. Just check the forum and you will see people who are 18, 19, and 20 with FICOs either in the high 600′s or low 700′s.

By the time you are 25 to 27, in my personal opinion there is really no excuse for not having an 800 or close to it. Here are the secrets to getting an 800 credit score.

Some family of mine in Ohio recently moved into a bigger house and of course, that means it’s time for furniture shopping!

So that involved swinging by a Levin Furniture location to price out a living room set while visiting them. It always amazes me how sales reps are so eager to offer you their store’s financing application. While the Levin credit card is not inherently worse than most other stores, I’ll say it again because so many people still don’t understand that this easy bait is a hook, line and sinker.

Issued by WFFNB or GE Capital? Same difference

Previously the Levin Furniture card was issued by World Financial Network Bank (WFNNB) but around 2010, they switched over to GE Money… different company, but same difference.

Actually scratch that… GE Money has an APR that’s even worse than what WFNNB charged. Just how bad is it? 29.99%

Yes, that’s right… 29.99% when I looked. The fact that most store cards have rates in the 20’s is bad enough, but 29.99% I believe is the highest rate I have seen on any credit card all year long.

0% promotional offers? Be careful

I know what you’re thinking: “I don’t care if it’s 29.99% because I will be getting a 0% promotion.”

But here’s why you need to care: The 0% promotion that GE Money offers on this card requires payment in full before the time is up to avoid interest.

For example if it is “no interest if paid in full within 36 months” what that actually means is that the only way there is no interest is if you pay it all off during that time. And if you don’t? Well prepare for pain. I’m talking brutal gut-wrenching pain. Why? Because the accrued interest from day one will be added on if it’s not 100% paid off in time.

In other words, if there’s a shadow of a doubt you can’t pay before the time is up, then you shouldn’t bite the bait. The application may be easy, but it’s not worth it. Plain and simple.

If you have decent credit…

…then there’s no point in risking it with these types of “no interest if paid in full” offers. Go with a major credit card that doesn’t do that. For example, the Citi Simplicity’s long 0% offer may be a better bet. Not to mention, you will be left with a card you can use everywhere instead of one furniture store.

Using a 0% balance transfer card for a few thousand dollars is a great way to save on interest if you’re in debt. However doing that with say, $25,000, isn’t always possible in today’s economy, where credit limits just aren’t what they used to be. And hence why some turn to loans instead.

But are these loans a bad idea? Should you apply?

The Discover Financial Services personal loans seem to be the most widely used (versus the other big banks). In fact, they regularly send me loan applications in the mail, even though I don’t have any credit card debt.

As you can see above, the Discover personal loan application offers anywhere from $5k to $25k. At the time of this review, the advertised interest rates ranged between 7.99% to 18.99% and you could a length of up to 84 months (7 years).

Among numerous reviews posted on the forum, there were 2 in particular which claimed this loan offer to be a “scam” for the following reasons:

• One guy said it because his loan wasn’t approved despite a good credit score.
• Another guy said it because he was given an interest rate higher than the 7.99% even though he claimed to have a high score.

In a nutshell, both seemed to feel it was a bait ‘n switch however I can assure you the Discover personal loans are definitely NOT a scam. Here’s why…

1. You may be surprised to hear that Discover and American Express have a lot in common, including the fact that both cater to those with excellent credit. In fact, many Discover cards are harder to get than AmEx cards. In other words, they are picky with who they choose. But this isn’t a bad thing… don’t you want a bank that manages their risk responsibly?
2. Remember the advertised range is 7.99% to 18.99%. Just because you don’t get the best rate, it doesn’t make it a scam. I have seen reviews from people with only average credit scores who still go a fairly good rate. For example in 2011 this guy got $19k at 11.99% with a credit score in the low 700s.
3. Ultimately if the personal loan is a lower rate than what you’re currently paying on your debt, it makes sense to get. Even if you get a rate 3% lower than the average APR on your credit cards, that still means you are saving money, right?

Verdict?

For large debts, the personal loans from Discover can be a good way to pay down debt at a lower rate. The vast majority of reviews I have read from customers are positive, so don’t let a couple disgruntled people talk you out of them. You should apply if you don’t want to do balance transfers.

On the other hand, even if you have $25k in debt, you may be able to transfer it at 0% if you split it between 2 or 3 different cards. Considering that there are 0% offers for almost 2 years, this may be the way to go. My recommendation would be to setup automatic bill pay on those accounts after you do them, so you don’t have to hassle with multiple bills each month.

Written Dec 2011