TransUnion is the third largest of the three major credit scoring agencies in the USA and Canada, the other two being Equifax and Experian. When you apply for a loan, these are the companies to which the lender will turn to find out your level of risk as a borrower. Each company has a slightly different scoring system, and the TransUnion credit score range may differ slightly from those of the others.
Understanding the TransUnion credit score range is important, because although many people quote their credit scores, good or bad, as though they were absolute quantities, in fact they are not very meaningful in isolation. Because different scoring models use different scale ranges, an individual credit score is only meaningful in the context of the maximum and minimum score of the particular range in which it is used. The scores are not an absolute definition of your level of risk, but define your risk in relation to the population in general.
Until a few years ago, the main scoring model used by the three major credit reporting agencies was that of FICO, the Fair Isaac Corporation, and this is still the model that is most used today, particularly by Experian and TransUnion. The Equifax credit scoring system, called BEACON Scoring, is calculated in a slightly different way from FICO, and its scoring range is from 280 to 850. The Experian score is often referred to as the Experian/Fair Isaac Risk Model, and the range is from 330 to 830.
TransUnion also subscribes to the FICO model, but modifies it to produce its own version called Empirica. The Empirica score can range from 150 to 934, while the TransUnion credit score range based on the FICO model is from 300 to 850. This falls into five categories: 300-619 – poor credit; 620-659 – sub-prime; 660-720 – prime; 721-750 – prime plus; and 751-850 – excellent credit.
However, in addition, TransUnion also has its own proprietary scoring model, called TransRisk. TransRisk is an unofficial score which you can purchase direct from the company, and is regarded as an educational score which you can used as a general guide to how your credit is doing. However, many lenders do in fact use it to decide on an applicant’s risk. For TransRisk, the scoring range is divided into three categories: high risk 300-600; credible 600-700; and highly credible 700-900.
A few years ago, in an attempt to provide some competition for FICO, the three agencies banded together to launch a new scoring system called VantageScore. As well as providing competition, it was also intended to provide more consistency in scoring among the three companies, as they had been using different criteria. VantageScore has a different scoring range from the TransUnion credit score range, and that of the others. In VantageScore, the range is from 501 to 990, and falls into five categories: F 501-600 – high risk; D 601-700 – non prime; C 701-800 – prime; B 801-900 – prime plus; and A 901-990 super prime. The idea was that this scoring range would be more precise, because of the categories being narower. Only a small proportion of banks and consumers used VantageScore in the first few years, but since the banking crisis, which indicated that the FICO system could have serious flaws in its ability to predict risk, there have been signs that its popularity may be increasing.
The actual criteria used by TransUnion to determine your credit score, and to which category in the credit score range you will be allocated, are kept secret. However, there are general FICO guidelines, known as the five-factor formula, which are reasonably clear. The largest weighting, 35 percent, is based on your payment history, that is, how consistent you have been in making your repayments, and a heavy weighting, 30 percent, is also given to the proportion of your available credit that you are using. For instance, if your credit cards are maxed out, or nearly so, your score will be lower than if you have low balances on your cards. Of the remainder, 15 percent is based on the length of your credit history, 10 percent on the types of account you have, and 10 percent on the number of recent enquiries that have been made.
The VantageScore weighting is calculated slightly differently, using six factors instead of five, and giving more weight to your recent credit transactions, and less to your length of credit history, current balances, and your available credit. Many people feel this is fairer and more likely to provide an accurate prediction of risk. Since the advent of VantageScore, FICO has updated its scoring model to FICO 08, in which the same factors are used, but weighted slightly differently, in an attempt to achieve greater accuracy. For instance, it is felt there is no real reason why a brief credit history should necessarily mean you are a higher risk.
The difference between the VantageScore range and the TransUnion credit score range makes it clear why it is so important to understand that credit scores are not absolute, and are only meaningful in the context of the scoring range. In fact, taking your credit score in isolation provides no real indication of your risk level. For instance, a score of 751 on the TransUnion credit score range will put you in the top category of excellent credit, whereas on the VantageScore range it means only a C rating.
If you are in the market for a loan or a line of credit, it is important to be aware that, although you do need to know your credit score and what category you fall into on the TransUnion credit score range, this is not the only factor which lenders will take into consideration when making their decision. For instance, they are likely to look at criteria such as employment history, stability of residence and other lifestyle factors, and in addition every lender is different and uses individual methods. It is essential to work at your credit score and keep it as high as possible, but remember that in itself a good score does not guarantee you will get the loan you are looking for.