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When a Credit Score Is Not a Credit Score

Posted on Jun 9, 2007 by Tom Fragala

Let’s get one thing down first. When virtually everyone says “credit score” in the US, what they really mean is a FICO credit score. FICO is the trademark for a proprietary analytical model developed and owned by Fair Isaac Corporation (NYSE:FIC). Essentially a FICO credit score is a way for financial services companies to rate and predict your credit worthiness. The FICO model uses the data in your credit report, which means you actually have three main FICO scores, one based on credit files from each of the three consumer credit reporting companies (Experian, TransUnion, Equifax)—each of which could be different. And there may be other types of credit ratings or scores for specific areas like mortgage or insurance.

Now, Fair Isaac earns a lot of money from their FICO services and they are in the enviable position of creating and owning a de facto standard. Sort of like the formula for Coke, only if there was no Pepsi around. Now there are plenty of other companies that would love to get a piece of that market, primarily the three credit bureaus. (They recently launched their own credit scoring product called VantageScore…that’s another story).

So, now to the point of this blog post. When you purchase a credit score, be careful about what the score really is. The credit bureaus and other companies often pitch a credit score product or even offer a free credit score. For example, Experian does this a lot and they use the term “PLUS score.” There is a difference. If the score does not say FICO score, then it may not be very useful to you. In fact, if you end up comparing, say, a PLUS score to a FICO score, then you are comparing apples to oranges. A PLUS score is NOT your FICO score (and that goes for the any non-FICO scores offered by TransUnion or Equifax). Experian is using a different model to generate your PLUS score. The score will differ from FICO, perhaps significantly. And the PLUS score is not your VantageScore either, that uses a different model and a different grading scale.

Confusing? You bet it is.

Thanks to Mark Enderle again for providing some background on this.