Guide To Credit Scoring Models: VantageScore VS FICO
Credit scores are an important tool in determining the health of your overall credit history. By distilling your history into a single number, you’ll know if you need to work on improving your credit, or if you can apply for that credit card with extra rewards.
Unfortunately, you may notice different scores if you check your score across different websites. This is likely because these sites are using varying models to determine your score. Two of the major models in use today are VantageScore and FICO Score.
Because both models are built and maintained by separate organizations, they have a number of meaningful differences. Read on below to learn some of the primary differences between VantageScore and FICO Score!
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What Are VantageScore & FICO?
VantageScore and FICO Score are two of the primary credit score models. Their scores are used to help determine applicants’ eligibility for credit cards, loans, mortgages, and other situations where lending money is required. These scores ultimately help measure consumer risk in an easy-to-digest number.
Both models deliver numbers that range between 300 and 850. Previously (up until 2013), VantageScore’s scores ranged from 501 to 990. However, it was changed to help consumers and lenders more easily compare across models.
FICO first came about in 1989 via the Fair Isaac Corporation, a data analytics company based out of San Jose, California. The company claims that its scoring method is used by 90% of the top lenders. Its algorithm is currently in its ninth iteration.
VantageScore, meanwhile, is the new kid on the block that arrived in 2006. Unlike FICO, which is run by a single entity, VantageScore was crafted by the three major credit bureaus: Equifax, Experian, and TransUnion. According to VantageScore, the model “was developed because there was a need for a highly consistent, more predictive scoring model that is easy to understand and apply.” The fourth and most current version of VantageScore was introduced in 2017.
VantageScore VS FICO: How They’re Different
As to be expected, because VantageScore and FICO are models created by separate organizations, they have a number of notable differences. Here are some of their biggest differences:
While VantageScore and FICO both use similar criteria to craft a score, the exact criteria are slightly different—as is how the scores are calculated.
For VantageScore, your score is calculated as follows:
- Extremely influential: Payment history.
- Highly influential: Type and duration of credit; percent of credit limit used.
- Moderately influential: Total balances/debt.
- Less influential: Recent credit behavior and inquiries; available credit.
FICO Score, meanwhile, breaks down the weight of its credit factors by percentage:
- 35%: Payment history.
- 30%: Amounts owed.
- 15%: Length of credit history.
- 10% each: Credit mix; new credit.
VantageScore previously publicized percentages, with payment history making up 40%, credit age and mix at 21%, credit utilization at 20%, balances at 11%, recent credit applications at 5%, and available credit at 3%. However, they currently use the “influential” monikers, so those percentages may no longer be accurate.
Length of credit history
Both VantageScore and FICO require different lengths of credit history for your score to be generated.
VantageScore simply needs you to have one month of history and one account reported to credit bureaus within the past 24 months. FICO Score, on the other hand, necessitates that you have a credit history of at least six months, plus an account that’s reported at least once in the past six months.
According to VantageScore, their model uses machine learning techniques, which allows them to score users with a limited credit history. All told, VantageScore claims this feature allows them to rate between 30 and 35 million people who can’t be scored on other models.
This means that new credit users may be able to see their VantageScore, but not their FICO Score. So if you can’t access your FICO Score and you only recently opened up your first line of credit, you may need to wait at least half a year before a score shows up.
Importance Of Credit Inquiries
VantageScore and FICO also vary when it comes to how they decipher credit inquiries. While both negatively consider credit inquiries and also do deduplication, their time spans are different. When it comes to credit scores, deduplication is the process of counting multiple hard inquiries as a single inquiry, which limits the negative impact to your score.
VantageScore deduplicates all credit inquiries within a 14-day window—even those of different types. However, if you have multiple inquiries more than 14 days apart, they’ll be counted as separate, potentially harming your score more drastically than a single inquiry might.
FICO, meanwhile, gives a 45-day window for deduplication. Their deduplication, however, only counts inquiries of the same type. This could be beneficial if you are shopping around for a specific type of loan. However, if you are applying for different types of credit lines in a very short time span, your FICO Score may be impacted more than your VantageScore.
Use of bureau data
Both models also take different approaches when it comes to how they utilize data from the major bureaus.
VantageScore’s model combines a set of consumer consumer data obtained from the three major credit bureaus. Their single formula is then developed based on this information. Their data also includes trends based on consumer patterns over time. In some cases, VantageScore uses up to two years of information when making calculations.
FICO, on the other hand, sets its formula based on anonymous data from millions of consumers. They take data from the three credit bureaus and use that to come up with their model. Additionally, FICO’s model looks at data that’s been reported to those bureaus when scores are generated (as opposed to VantageScore’s trend-based model).
Weight of late payments
While VantageScore and FICO both consider late payments, they treat types of late payments differently. FICO looks at all late payments equally. This means that a late credit card payment is counted the same as a late mortgage payment.
VantageScore, meanwhile, places a greater weight on certain types of payments. This model specifically considers late mortgage payments more important. So if you have made a late payment on your mortgage, you’ll be more negatively affected than if you’ve missed a car payment.
Additionally, each organization estimates that late payments take different time spans to recover from. For the VantageScore, a missed payment could take a year-and-a-half to recover from, regardless of your prior credit history.
FICO suggests that the recovery time depends on the user’s starting credit score. For instance, a person with a score of 680 will take nine months to recover from a missed mortgage payment. A different person with a score of 720 will take roughly three years, while someone with a score of 780 will take between three and seven years.
What this ultimately means is that differences in your FICO and VantageScore’s could be partly explained by what types of late payments you have on your credit history.
Why Does This Matter?
Because VantageScore and FICO Score are calculated differently, use data differently, and pull information from different sources, you may see variations of scores when comparing across score-checking tools. Depending on which model a creditor uses, your levels of success may vary when applying for different loans or credit cards. Plus, by understanding how VantageScore and FICO differ, you won’t be shocked when you do see differing scores.
With that said, most differences in scores should be minimal, which means the real-life impact of different credit scores should also be minimal. Additionally, most creditors will also look at your complete credit history—something that should vary even less than your VantageScore or FICO Score.
Regardless, if you are attempting to improve your credit score, worrying about the differences between VantageScore and FICO won’t help much. Instead, focus on the bits where they’re similar.
They both consider your payment history and how much credit you’re utilizing above other factors. As such, paying off bills on time, managing your credit utilization effectively, and checking your credit history for errors are a few of the main ways a person can boost a credit score—no matter if it’s powered by VantageScore or FICO.
Ultimately, the differences between the two scores models should have minimal impact on your scores, ability to apply for loans, credit cards, etc. As long as you practice good credit discipline, you shouldn’t have a problem building and maintaining an attractive credit profile.