FICO is the company that invented credit scores. VantageScore Solutions builds the VantageScore credit score, which is sold by all three credit bureaus (as are FICO’s scores) Since FICO invented them and VantageScore also builds them you might think that they control the scores, but they don’t. The score is dependent upon credit data owned by the credit bureaus; Experian, Equifax and TransUnion.
Bureaus compile the data
FICO and VantageScore build the scoring models using credit data compiled by the three U.S. credit bureaus. The data is supplied by many different sources – credit card issuers, auto lenders, mortgage lenders, collection agencies, retailers, gas companies, and public record sources (judgments, liens and bankruptcies).
In order to calculate a credit score of any type you have to marry two things…credit data and a scoring model. FICO is not a credit bureau. They do not collect, maintain and sell credit reports to lenders. VantageScore is also not a credit bureau. So, neither party can sell scores to lenders because, well, they don’t have the credit reports.
The credit bureaus on the other hand DO have the credit reports. And, because of their relationships with both FICO and VantageScore they have access to their scoring models. One plus one equal two…or in this case….one credit report plus one scoring model equals one FICO or VantageScore credit score.
Because only the credit bureaus have the 2 items needed in order to calculate a score they are the ones that sell scores to lenders, collection agencies and any other party with a legit reason to see a credit report and a credit score. And, when they do so they must share in that revenue with the scoring model developers.
It’s a strange business model but certainly not unheard of. When you buy a Dell computer…do you also go out and buy and Intel processor? No. That’s included with the PC. Intel didn’t sell you anything…but Dell did. Dell is to the credit report as Intel is to the credit score. Think about it.
Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, founder of www.creditexpertwitness.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. You can follow John on Twitter here.