Each of the three major consumer credit scoring companies has adopted their own credit scoring model. For TransUnion, the scoring methodology is called “TransRisk”. Although Fair Isaac Corporation, or FICO, and TransUnion TransRisk scores are both referred to as “credit scores”, there are some key differences. Both companies measure consumer creditworthiness, but the basis of their scoring processes differ significantly.
FICO scores are considered the “official” measure of credit risk and are employed by 90% of lending institutions and banks. FICO scores, which range from 300 to 850, average a reading of consumer scores from TransUnion, Equifax and Experian.
The TransRisk score is an unofficial “credit score” that consumers can purchase from TransUnion. TransRisk is a type of “educational score,” and has no relation to a consumer’s actual credit score.
Considerations For TransRisk Scores
Most lenders and finance companies consider only the FICO score when making credit decisions. A TransRisk score may or may not be close to the actual results of a consumer’s FICO score. Consumers are advised to use the TransRisk score only as a general guide and not as a replacement for their actual FICO score.
It’s an End Run!
In 2006, in an effort to try and take business away from FICO, the three major credit-reporting agencies introduced a product called VantageScore. FICO filed suit against the three consumer credit rating agencies, including TransUnion, and according to court documents filed in the FICO v. VantageScore federal lawsuit the VantageScore market share is less than 6%. The VantageScore scoring methodology produces a score range from 501–990.
TransUnion’s Empirica Score
An Empirica score is a credit score provided exclusively to lenders by TransUnion.
It differs from the score which a consumer may purchase. TransUnion provides its TransUnion score and TransRisk score as consumer products. The Empirica score is a FICO credit score, whereas the other consumer products marketed by TransUnion are not. TransUnion subscribes to the FICO risk scoring model and then tweaks it to produce their own version of the credit score. An Empirica score ranges from 150 to 934.
Getting To the Truth Isn’t Easy
For consumers who wish to obtain their TransUnion credit score it can be a tricky process. First, they must pay for their credit score and then calculate what their number reflects while comparing it to the scores from other credit bureaus.
How Does It Work?
A TransUnion credit score uses data from a consumer’s TransUnion credit report to calculate how much of a risk they are to potential lenders. The TransUnion credit report contains information about current accounts, such as credit cards, mortgages or car loans, as well as records of any bankruptcies or tax liens. A TransUnion credit report also has records of any inquires that potential lenders have made to credit bureaus in the past. Consumers can access their TransUnion credit report for free, but they won’t be able to see their actual credit score. To see the score, the consumer must pay an additional fee.
Crunching the Numbers
How is the TransUnion credit score calculated from a credit report? TransUnion gives each aspect of a credit report a certain amount of importance. For example, making payments on time might be worth 35% of the credit score, total debt might be worth 30% and so on. The actual models used to calculate scores are carefully guarded secrets and TransUnion uses several models to calculate its credit scores; however, all of the formulas are based on the FICO formula.
Going Around FICO
In 2006, in an effort to try and take business away from FICO, the three major credit-reporting agencies introduced a product called VantageScore. FICO filed suit against the three consumer credit rating agencies, including TransUnion, and according to court documents filed in the FICO v. VantageScore federal lawsuit the VantageScore market share is less than 6%. VantageScore is not associated with FICO and is not as commonly used by potential lenders as FICO credit scores. And VantageScore uses a different rating system ranging from 501 to 900 and also a letter grade ranging from A to F.
What’s the Score?
The TransUnion FICO-based credit score will range from 300 to 850 with the higher number indicating a better credit risk. Most consumers have credit scores between 650 and 799. But if a consumer compares the TransUnion credit score to an Equifax score or Experian score, the numbers will vary. Each credit bureau has a slightly different set of data for their calculations and most lenders check all three credit scores to develop a median number for the consumer’s “real” credit score.