The 'Parallel Universe' of Credit Scores

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You might think that your FICO score is the be all and end all of your credit report. You’d be wrong.

There’s a “parallel credit universe” out there, according to our credit guru John Ulzheimer, and it’s important to know how it works so that you can continue to work for the best credit possible, and thus the lowest rates on everything form your car loan to your home loan.

There are still only three major credit reporting agencies (TransUnion, Experian and Equifax), and most lenders either buy credit reports from them or send your account information to them. FICO, built by Fair Isaac, is a credit score that resides on the mainframes of all three agencies. But many people – an estimated 50 million in the U.S. – do not have any credit with lenders who report to the “Big 3” credit agencies, which makes it extremely difficult for them to get loans at competitive rates.

Outside of getting a credit card and taking on some debt, there’s another option for these folks. A company by the name of PRBC (Payment Reporting Builds Credit) allows consumers to self-report the details of their rent, utilities, cell phone bill and other nontraditional financial obligations. The company verifies your report, for a fee, and then grants you a new credit report. FICO has even built a credit score that will score their limited data and provide a risk score that lenders can use to evaluate nontraditional information for a fee of about $30. The advantage to this approach is that it gets you into the system of the credit agencies, albeit for a cost – and it’s still not widely used by mainstream lenders, said Ulzheimer.

There’s also a new credit score in town trying to give FICO a run for its money. VantageScore is a proprietary score created by all three reporting agencies that competes with Fair Isaac. You can learn more about Vantage here.