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FICO vs. VantageScore Credit Scores: What's the Difference?

Darrin Singer Jr

Informational

March 10,2023




What are FICO and VantageScore credit scores?


FICO and VantageScore credit scores are numerical assessments of an individual's creditworthiness. These scores are used by lenders to evaluate the likelihood that a borrower will repay their debts on time. Credit scores are based on a variety of factors, including payment history, outstanding debt, length of credit history, and types of credit used.


FICO credit scores


FICO credit scores are produced by the Fair Isaac Corporation, which was founded in 1956. FICO scores range from 300 to 850, with higher scores indicating better creditworthiness. FICO scores are used by 90% of top lenders in the United States.


FICO credit scores are the most widely used credit scoring model in the United States. According to FICO, its scores are used in 90% of lending decisions. FICO has developed a number of different scoring models over the years, with the most commonly used being FICO Score 8. This model is based on a scale ranging from 300 to 850, with higher scores indicating better creditworthiness. FICO Score 8 takes into account factors such as payment history, outstanding debt, length of credit history, types of credit used, and recent credit inquiries.


While FICO Score 8 is the most commonly used scoring model, lenders may also use other FICO scoring models, such as FICO Score 9 or FICO Auto Score. These models may weigh credit factors differently or be designed for specific types of lending products, such as auto loans.


VantageScore credit scores


VantageScore credit scores were developed in 2006 by the three major credit bureaus: One advantage of VantageScore is that it uses a consistent scoring model across all three major credit bureaus (Equifax, Experian, and TransUnion). This means that regardless of which credit bureau is used to pull a credit report, the resulting VantageScore should be similar. Equifax, Experian, and TransUnion. VantageScore scores range from 300 to 850, with higher scores indicating better creditworthiness. VantageScore scores are used by approximately 20% of lenders in the United States.


How do FICO and VantageScore credit scores differ?


While both FICO and VantageScore credit scores are designed to assess an individual's creditworthiness, there are some significant differences between the two.


Score Range


FICO scores range from 300 to 850, while VantageScore scores also range from 300 to 850. However, VantageScore has recently introduced a new score range of 501 to 990 to help more accurately evaluate individuals with limited credit histories.




Scoring Models


FICO uses a variety of scoring models, with the most commonly used being FICO Score 8. VantageScore, on the other hand, uses a single scoring model that is updated regularly. VantageScore 4.0 is the latest version of the VantageScore scoring model.


Credit Factors


FICO and VantageScore credit scores are based on similar credit factors, including payment history, outstanding debt, length of credit history, and types of credit used. However, there are some differences in how each score weighs these factors. For example, FICO scores place a greater emphasis on payment history, while VantageScore scores consider a broader range of factors, including payment history, credit utilization, and available credit.


Credit Inquiries


FICO scores differentiate between "hard" and "soft" credit inquiries, with hard inquiries potentially having a negative impact on your credit score. VantageScore scores treat all credit inquiries the same, regardless of whether they are hard or soft.


How Credit Scores are Used by Lenders to Make Loan and Credit Card Decisions


Credit scores are a critical factor in determining whether lenders will approve a loan or credit card application. Lenders use credit scores to assess an individual's creditworthiness and determine the level of risk associated with lending to that individual.


When lenders receive an application for credit, they will typically request a credit report from one or more of the major credit reporting agencies. This credit report will contain information about the individual's credit history, including their credit accounts, payment history, and outstanding debts.


Using this information, lenders will calculate the individual's credit score using a credit scoring model, such as FICO or VantageScore. Lenders will then use the credit score to assess the individual's creditworthiness and determine whether to approve the application.

In general, a higher credit score indicates that an individual is less risky to lend to, while a lower credit score indicates a higher level of risk. This means that individuals with higher credit scores are more likely to be approved for loans or credit cards, while individuals with lower credit scores may face more difficulty getting approved.


Lenders may also use credit scores to determine the terms of a loan or credit card offer. Individuals with higher credit scores may be offered lower interest rates or better terms, while individuals with lower credit scores may be offered higher interest rates or less favorable terms.


It's important to note that different lenders may have different criteria for evaluating creditworthiness, and credit scores are just one factor that lenders consider. Other factors, such as income and employment history, may also be taken into account when evaluating a loan or credit card application.



Which credit score should you pay attention to?


Understanding your credit score is essential for your financial health. FICO and VantageScore credit scores are two of the most commonly used scoring models to assess creditworthiness. Both scores use similar credit factors, including payment history, outstanding debt, length of credit history, and types of credit used. However, there are differences in how each score weighs these factors. While FICO scores are the most widely used credit scoring model in the United States, VantageScore has the advantage of using a consistent scoring model across all three major credit bureaus. Monitoring both scores is important to get a complete picture of your creditworthiness. By keeping track of your credit score and the factors that influence it, you can take steps to improve your credit and increase your chances of getting approved for loans and credit cards with better terms and interest rates.



FAQ


  1. What is the difference between FICO and VantageScore credit scores? Answer: FICO and VantageScore credit scores are two different types of credit scoring models used by lenders to assess an individual's creditworthiness. While both models use similar factors to calculate a credit score, there are differences in the way each model weighs those factors.

  2. How are FICO and VantageScore credit scores calculated? Answer: FICO and VantageScore credit scores are calculated using a variety of factors, including payment history, outstanding debt, length of credit history, and types of credit used. However, the specific formula used to calculate each score is proprietary and not publicly disclosed.

  3. Which credit score is used more by lenders? Answer: FICO credit scores are used by approximately 90% of top lenders in the United States, while VantageScore credit scores are used by approximately 20% of lenders.

  4. Can you have a good FICO score but a bad VantageScore score, or vice versa? Answer: Yes, it is possible to have different credit scores from different scoring models. This is because each scoring model may weigh credit factors differently and use a different algorithm to calculate a credit score.

  5. Can you check your FICO and VantageScore credit scores for free? Answer: Yes, you can check your FICO and VantageScore credit scores for free through various credit monitoring services and online platforms. However, some services may require a paid subscription for full access to your credit report.

  6. Can you improve your credit score quickly? Answer: While it is possible to improve your credit score over time, there is no quick fix for improving your credit score. Factors that can positively impact your credit score include paying bills on time, reducing outstanding debt, and maintaining a mix of credit types.

  7. How long does it take for credit score improvements to show up on your credit report? Answer: Credit score improvements may take several months to show up on your credit report, as credit bureaus typically update credit reports once per month. However, the timeline for credit score improvements can vary depending on the specific factors that are impacting your credit score.

  8. How can you dispute errors on your credit report that affect your credit score? Answer: You can dispute errors on your credit report by contacting the credit bureau in writing and providing documentation to support your dispute. The credit bureau must investigate your dispute and respond within 30 days.

  9. What is the impact of late payments on your credit score? Answer: Late payments can have a negative impact on your credit score, as payment history is a significant factor in calculating your credit score. Late payments may remain on your credit report for up to seven years.

  10. Can you get a loan or credit card with a low credit score? Answer: It is possible to get a loan or credit card with a low credit score, but it may be more difficult to get approved and you may be charged higher interest rates or fees. It is important to shop around and compare offers from different lenders before applying for credit.






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