There are two types of credit scores designed to estimate your creditworthiness. Both FICO Score and VantageScore use a credit range from 300 to 850, with a higher number indicating greater creditworthiness.
What is the difference between FICO and VantageScore?
FICO was established in the 1980s by the company formerly known as Fair, Isaac and Company, founded in 1956. It is now known as Fair Isaac Corporation, or FICO. The FICO Score was created to help lenders identify the customers most likely to default on a loan.
The latest version of the FICO Score is version 9, but version 8 is the most commonly used. FICO also creates individual scores specifically for auto loans, credit cards, and mortgages.
VantageScore was created when the three major credit reporting companies – Equifax, Experian, and TransUnion – formed a joint venture called VantageScore Solutions LLC, and in 2006, VantageScore 1.0 was launched. VantageScore is designed to provide stability among the credit scores offered by the three credit reporting companies, which are sometimes referred to as credit bureaus. There have been four versions of VantageScore since its inception.
Evaluation Criteria
The FICO scoring model requires at least one account or credit line that has been open for at least six months to establish a credit score. You must also have account activity within the past six months.
The VantageScore credit scoring model works with one account or credit line and has no minimum requirement for credit history length.
Weight Distribution
FICO places more importance on payment history, while the latest version of VantageScore emphasizes overall credit usage and balances.
The FICO scoring formula is based on five categories of information, while VantageScore 3.0 uses six categories. VantageScore 4.0 uses five categories.
The evaluation criteria in VantageScore 4.0 changed slightly, as factors were combined, and payment history was made less important. It no longer assigns a percentage to each criterion; instead, it indicates the impact of each.
Payment history considers missed payments, including their amount and how recent they occurred.
Credit history criteria usually include the age of your oldest account, your newest account, the average age of your accounts, and the time since the last use.
Credit mix includes the different types of credit you have used, including bank credit cards, retail credit accounts, installment loans, finance company accounts, and mortgage loans.
Recent credit behavior/account inquiries consider whether you have just opened many new credit accounts.
Credit inquiries are made by potential lenders to determine your creditworthiness for a specific loan or other credit request.
Handling Hard Inquiries
FICO and VantageScore also differ slightly in how they handle hard inquiries. With FICO, multiple hard inquiries within a 45-day period are treated as one inquiry.
VantageScore considers multiple hard inquiries as one inquiry if they occur within a 14-day period.
This is known as the “exclusion,” which is helpful if you are shopping around for rates among multiple lenders, such as when looking for a mortgage.
Score Ranges
FICO uses a scoring range of 300 to 850.
VantageScore 3.0 adopted the 300-850 range used by FICO. Credit scores within this range are classified as follows:
781-850 = Super Prime
661-780 = Prime
601-660 = Near Prime
500-600 = Subprime
300-499 = Deep Subprime
Earlier versions of VantageScore used a range from 501 to 990. Additionally, VantageScore 2.0, released in October 2010, and VantageScore 1.0, launched in March 2006, assigned a letter grade to credit scores based on where they fell within the following ranges:
901-990
Score 900-801 = A, Super Prime
Score 900-801 = B, Prime Plus
Score 800-701 = C, Prime
Score 700-601 = D, Non-Prime
Score 600-501 = F, High Risk
The VantageScore 4.0, released in April 2017, did not change the categories and ranges from version 3.0.
Other Information
Vantage says that your score does not take into account your race, color, religion, national origin, gender, or marital status, as any of these factors would be illegal under federal law. It also disregards your age, salary, occupation, employment history, as well as your place of residence and the interest rate charged to you on your credit card or another account.
Vantage also states that it excludes child or family support payments you have to make and does not change your score based on credit report requests from you, an employer, or a lender for promotional offers or periodic reviews. It also does not consider whether you are using credit counseling services.
The VantageScore website states that it does not take into account the following factors: your race, color, religion, nationality, marital status, age, salary, occupation, address, employer, employment history, total assets, or your location.
Conclusion
The credit score you should consider is the one that a potential lender will use to approve or deny your credit application.
Since more lenders are using the VICO score, you may be better off checking that score. However, you shouldn’t assume that; always ask your lender which credit score will be checked.
FAQs
Who uses VantageScore vs. FICO?
You will find that most lenders use your FICO score. FICO claims that 90% of top lenders use FICO scores to determine credit approvals, loan terms, and more. Although FICO is the most common, lenders and credit card companies can use VantageScore instead. A 2019 study found that over 2000 financial institutions use over seven billion VantageScores annually.
How accurate is VantageScore vs. FICO?
VantageScore and FICO are both accurate measures of credit history, but they use slightly different calculations. This does not mean that one score is more accurate than the other, even if they arrive at different numbers for your credit score.
Source: https://www.thebalancemoney.com/fico-score-vs-vantagescore-961144
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