The Beacon credit score is a number used to determine a consumer's risk index. Equifax is the credit reporting agency that formulated this number. As the nation's leading agency, Equifax soon saw that the other two agencies adopted their Beacon algorithm for calculating credit scores. Their algorithm is complex, involving 35% of the score based on payment history, 30% based on current debts, 15% based on the length of time accounts have been open, 10% based on types of accounts and 10% based on recent credit inquiries.
Beacon Credit Score - What You Should Know
Eventually, the Beacon credit score algorithm was also adopted for the FICO scoring method used by Trans Union and Experian. One common misconception involves the idea that companies determine credit scores differently. Since each one uses the FICO method that originated from the Beacon score algorithm, then scores will be somewhat close in range - for the most part. However, it is possible to see a drastic difference from one company to the next. This is due to different reports, not a different credit scoring algorithm. For example, Equifax may have many more reports about an individual than Trans Union has on record. If the information Trans Union receives includes on the negative items, but good standing accounts are not reported, the score seen on Trans Union's report will be different from the FICO score from Equifax.
Beacon Credit Score - New Names
Since there has been much confusion surrounding the FICO algorithm arising from the Beacon credit score model, there will be new names for each of the three agencies' scores. Trans Union's old score reference name was Empirica, while Experian simply used the terms FICO and FICO II. The new method of credit scoring is collaboratively called NextGen FICO, which was introduced by the Fair Isaac Corporation. Experian's score will be referred to as the FICO advanced risk score. Trans Union's numbers will be called Precision and Equifax's new individual score will be called Precision. When hearing these terms in the future, this will make it easier to distinguish from which each NextGen FICO score comes from.
