There are two companies that dominate the credit scoring industry. FICO is the clear industry leader, but VantageScore has been gaining market share since 2006, when it was created by the three major credit reporting agencies. Both companies develop credit scores that are used to evaluate your creditworthiness. However, the VantageScore and FICO scoring models use different criteria to determine your scores. This article will describe the difference between a FICO vs. Vantage Score.
The VantageScore model was introduced in 2006 and was developed by the three major consumer credit bureaus — Equifax, Experian, and TransUnion — to create a “more predictive scoring model that is easy to understand and apply.”
What’s a FICO Score?
FICO Scores were developed by the Fair Isaac Corporation to help standardize credit reporting and make it easier for lenders to determine an applicant’s risk. It’s currently the most widely used credit scoring system.
A FICO Score is a three-digit number based on the information in your credit reports. It helps lenders determine how likely you are to repay a loan. This, in turn, affects how much you can borrow, how many months you have to repay, and how much it will cost (the interest rate).
FICO offers different scores for different industries, so your mortgage lender might see a different score than your credit card issuer or car loan provider.
What’s a VantageScore?
VantageScore started in 2006 as a joint project between the three major credit bureaus, Equifax, Experian, and TransUnion. The purpose was to create an alternative to traditional credit scoring models and leverage predictive trend modeling to help calculate risk.
The newest version of this scoring model—VantageScore 4.0—uses machine learning techniques to help better understand credit behaviors over time and is supposed to make it easier for consumers to obtain credit. According to the official VantageScore website, this adds 30 to 35 million adult consumers to the credit pool “who otherwise would be virtually invisible to mainstream lenders.”
What’s the difference? FICO vs. Vantage Score?
Initially, the biggest difference between VantageScore and FICO Score was the scoring range itself. While FICO used a credit range of 300 to 850, VantageScore chose 501 to 990. As a result, VantageScore versus FICO Score conversion was necessary for both consumers and lenders to understand the overall strength of their credit rating.
With the shift to VantageScore 3.0, however, both credit scoring frameworks now use the same scale.
A FICO score is determined using five key factors:
- Credit history: 35%
- Credit utilization: 30%
- Length of credit history: 15%
- Mix of credit: 10%
- New accounts opened: 10%
A VantageScore is determined using six factors:
- Payment history: 40%
- Age and type of credit: 21%
- Credit utilization: 20%
- Balances: 11%
- Recent credit: 5%
- Available credit: 3%
What’s a good FICO vs. Vantage Score?
Here’s a general breakdown of the scores, their implications and what is considered a good or bad FICO and Vantage Credit Score.
FICO Score Ranges:
- 800-850 – Excellent
- 740-799 – Very good
- 670-739 – Good
- 580-669 – Fair
- 300-579 – Poor
Vantage Score Ranges:
- 781-850 – Excellent
- 661-780 – Good
- 601-660 – Fair
- 500-600 – Poor
- 300-499 – Very Poor
How to improve your FICO or VantageScore
You can improve either type of score quickly by paying down large account balances to reduce your utilization. But it takes time to build a good credit history, increase the age of your accounts and develop a track record of on-time payments.
Want to instantly increase your credit score? Experian Boost helps by giving you credit for the utility and mobile phone bills you’re already paying. With older scoring models, those payments could not help your score — only harm it if an account went into collection.
In addition, your mortgage lender can help you correct errors on your credit report. Mortgage lenders have access to a service called Rapid Re-Score that can help increase your score in one to two days when you apply for a mortgage.
How to keep track of your credit scores
Keeping track of your credit score can help you know how likely you are to get approved for credit.
You’re entitled to one free copy of your credit report each year from each of the three major credit bureaus. The free credit reports are available at AnnualCreditReport.com. You can also purchase a credit report directly from Equifax, TransUnion, and Experian.
Additionally, many credit card issuers and financial institutions now offer free credit reporting as part of their product offerings. This can be a great way to keep track of your credit and make sure it’s error-free, but it is important to note that it is not the official report and might not give you the full picture of your credit.