FICO Versus Vantage

When comparing the major credit scoring models against each other, it may seem to be a case of “out with the old, in with the new.”

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FICO has been the top dog in the credit scoring industry for years, but VantageScore is edging its way in with small tweaks to the service that provide greater flexibility.

 While lending companies use various scoring methods–both proprietary and the two major methods–FICO and VantageScore are the two primary go-to models consumers can use to gauge what lenders are seeing.

 Their newest versions, FICO 8 and VantageScore 3.0 show increasing consideration for consumer circumstances over older, more stringent versions. FICO offers a basic report that the consumer can see, but also provides at least fifty different types of credit scores, depending on the requirements of potential lenders.

 Despite VantageScore and other models edging their way into the market, FICO continues to be the forerunner in the credit rating industry since it created the scoring system. FICO stands for the Fair, Isaac, and Company; it was founded in 1956 in San Jose, California and quickly gained traction after pitching several lenders its scoring algorithm to help companies determine a potential borrower’s creditworthiness. In 1986, the company went public and had been offering general purpose and more tailored credit scores.

 In 2006, VantageScore hit the scene due to a collaboration between the three major credit bureaus—Experian, TransUnion, and Equifax—to provide a scoring system to compete against FICO. VantageScore is run by VantageScore Solutions, LLC, and features a similar scoring system to FICO.

Credit repair Austin, Texas can also help you improve your score, regardless of the method.

Similarities Between FICO and VantageScore

VantageScore originally began calculating scores based on a 501 to 990 range, assigning a letter grade to subranges between those two numbers. To be more consistent with what consumers were used to seeing, VantageScore’s system changed to reflect the same range as FICO. Both firms assign scores between 300 and 850. Scores up to 689 translate into a bad credit rating. 630 to 689 equals fair or “average” credit. 690 to 719 means you have good credit, and anything 720 and above is excellent.

Hard Inquiries

FICO and VantageScore penalize consumers for too many hard credit inquiries in a short period. Hard credit inquiries are any checks on your credit score that you’ve initiated, such as when applying for a credit card or personal loan. They ignore soft inquiries, or any inquiries made by potential lenders that borrowers haven’t initiated, but will lower a score if a hard inquiry for the same type of credit is made in a narrow window of time.

 Both companies deduplicate, which means they won’t penalize you for a shotgun blast of credit inquiries by different lenders for a single credit line. This is especially relevant when a car dealership, for example, sends auto loan applications to a large selection of lenders on the car buyers' behalf.

Debt Forgiveness

More recently, FICO and VantageScore have shown a willingness to ignore bad debt that’s been paid off. The record of the initial bad debt is still on the credit report, but both scoring models no longer include it in their scoring evaluations. This new approach to debt repayment gives consumers big incentives to pay the debt off.

Differences Between FICO And Vantage

One key way these two credit score measuring methods differ is how each pulls your credit history to generate a score.

FICO credit score accumulates all available credit history data about a potential borrower and then uses it to generate a credit score. A Vantage score, on the other hand, focuses on credit history and lets a lender know about credit behavior. 

Although these credit measuring methods use quite a few similar factors to generate a credit score, the biggest difference is what factor each method prioritizes and the impact that factor has on the overall score. Both analyze your credit history, balance, inquiries, payment history, and credit usage, but assign different weights to each that could impact the respective score differently.

Point Value

These credit scoring models analyze your credit report, then award you with points based on the information it finds. You get points based on the factors that contribute to credit utilization, payment history, card inquiries, and credit history.

FICO and Vantage have different weights or values for each factor. Some factors may be very important to FICO while having negligible significance to Vantage. For example, you might get 150 points from FICO for having zero late payments. For the same payment history, Vantage gives you 155 points. (Note: these aren’t actual points, but hypothetical examples.)

Bureau Models

Vantage uses a single tri-bureau model to generate a score, which can be used with a credit report from companies like Equifax, Experian, or TransUnion. FICO, on the other hand, creates bureau-specific scoring models. This means that even though the newest FICO score is a 9, there are three FICO models with slight variations that could each generate a different score for the same person. These three models are part of the three major credit bureaus.

So, there is a possibility that your lender might use any one of those models to approve your loan. This means FICO scores can vary from lender to lender based on the credit report that was used to derive a score.

For example, if your TransUnion-based score is better than your Equifax-based score, one lender might approve your loan while the other will deny it. The Vantage score is more uniform across all three bureaus, so the score tends to be the same rather than vary from lender to lender.

Credit Utilization

Credit utilization can be a crucial factor in creating your score. In most cases, the most recent revolving account balance is required. Credit utilization is basically the total credit card balance divided by credit limits.

A Vantage score looks at your utilization trend to check if you’re making minimum credit payments or paying the full amount. Vantage puts weight on credit utilization, whereas FICO doesn’t.

Debt Weighing

VantageScore is also more strict than FICO in terms of late payments. It considers all forms of late payment with different degrees of importance when calculating a credit score. A late mortgage payment is weighted more heavily than a credit card payment or an outstanding medical balance. FICO weighs all types of outstanding debt over $100 equally. There’s no difference in weight between mortgages, credit card debt, or medical bills.

The advantage for consumers with this schema is the leniency over medical debt. With so many changes in medical insurance terms in the past ten years, increasing medical costs have fallen on consumers’ shoulders, and an uptick in billing mistakes has also resulted in billing disputes and unpaid balances.

Crowded Business

Although VantageScore and FICO are the two primary sources for consumers to obtain a creditworthiness score, they are only two of nearly a thousand different scoring methods on the market.

The problem is that consumers never see the scores generated by all of the other methods–most of these are proprietary in-house scoring algorithms used by major lenders. The good news is that the score that the vast majority of these proprietary methods generate will be similar to the VantageScore or FICO score you see. So, you’ll have ample peace of mind knowing where you stand based on receipt of a FICO or VantageScore rating. 

Although both FICO and VantageScore have unique characteristics that set them apart, you can rely on either scoring model to get an accurate assessment of where you stand in terms of creditworthiness. You can even use these credit scores to buy a car.

In Summary

Although FICO and Vantage share some similarities, there are also many differences between the two of them. They still serve the same purpose, but use different methods. 

Want to know what credit score you need for an apartment in Austin? Take a look at our latest article.

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