A lot of people think we each have just one credit score. But that's like saying every snowflake is the same. The reality is that 1,000-plus different credit score models are out there. The two most popular brands – FICO and VantageScore – alone can produce upwards of 50 different scores for a single person. And that number is about to rise.This fall, VantageScore, the company formed by the three major credit bureaus to compete with the Fair Isaac Corporation, will officially launch its latest model, VantageScore 4.0. So what does that mean for your wallet and consumer finances in general? Here's what you need to know.[See: 12 Habits to Help You Take Control of Your Credit.]What's new with VantageScore 4.0? Fundamental differences in credit scores' underlying algorithms can affect how predictive they are, how many people they can be generated for and lenders' overall conclusions regarding the creditworthiness of consumers. That's why each new model from VantageScore or FICO is worth examining. Major lenders are going to use it, which means it's going to have an impact on your wallet at some point.[See: 10 Quirky Ways to Save Money.]VantageScore 3.0, for example, is used by 80 percent of the 25 largest U.S. lenders, according to VantageScore. And VantageScore 4.0 builds on the success of its predecessor, incorporating 3.0's advances while adding a bunch more of its own. Here's a breakdown of what's new about VantageScore 4.0. "Trended" credit data: Credit scores have historically been like pictures. In other words, they consider just a snapshot in time, grading the contents of your credit report as it stands whenever the score is generated. VantageScore 4.0 is a bit more like a movie because it takes into account how credit report data changes over time. For example, VantageScore 4.0 considers how balances, credit limits and payment amounts fluctuate over a period of 24 months. This so-called trended credit data, which all three major bureaus now have, is true to its name, making it easier for lenders and consumers to spot trends in their credit history and act in the best interest of their wallets.Same model for all three credit reports: Most credit scores use slightly different recipes, depending on whether an Equifax, Experian or TransUnion credit report is supplying the data. This leads to inconsistencies beyond what any differences in the contents of those reports typically produce. In other words, VantageScore 4.0 removes an unnecessary variable from the equation by always using the same model.Better for people with limited credit: VantageScore 4.0 uses machine-learning technology to predict the future performance of people with "thin" credit files, despite the lack of a robust credit history. This makes it easier to create a credit score for such individuals, which in turn makes it easier for them to borrow.VantageScore also makes a point of ignoring tax liens and civil judgments that aren't properly documented. These should have already been removed from your credit reports in July. But this ensures such records aren't held against you.VantageScore 4.0 versus the competition. VantageScore 4.0 is not reinventing the wheel, just improving it. So the basics – most notably, the range – won't take any getting used to. With that in mind, here's a quick breakdown of how VantageScore 4.0 compares to its predecessor and their main rival in some key categories:CategoryVantageScore 4.0VantageScore 3.0FICO Score 8Score range300 to 850300 to 850300 to 850Scoreable population225 million225 million190 millionRecent credit experience needed for score1 month1 month6 monthsRate-shopping experience14 days14 days30 to 45 daysLate paymentsMortgages penalized mostMortgages penalized mostPenalized equallyCollection accountsIgnored once paidIgnored once paidIgnored if original balance is less than $100How to get VantageScore 4.0. You can't get your VantageScore 4.0 credit score quite yet. The company says it will be released in the fall through the major credit bureaus without providing further specifics. But you can check your VantageScore 3.0 credit score for free right now. They're available from a variety of sources, ranging from credit card companies such as Capital One to free credit score websites such as WalletHub.At the end of the day, knowing one of your major credit scores is enough. It doesn't really matter which type it is, as long as you get it for free, track it over time and use the information to improve. After all, there is a very high correlation between the scores produced by the most popular credit score models, according to the Consumer Financial Protection Bureau. And most major lenders use the types of credit scores that are available to consumers merely as a starting point. They often proceed to modify those scores with in-house analytics, creating their own proprietary ratings with which to judge applicants.[See: What to Do If You've Fallen (Way) Behind on Your Credit Card Payments.]As a result, the release of VantageScore 4.0 is good news for borrowers in general. But most people won't notice much of a change. The average credit score in the U.S. is currently 669, according to WalletHub data. And changes in the economic climate are far more likely to affect that than a new-and-improved credit score model.25 Ways to Fix Your Finances Fast.
