VantageScore vs. FICO: What’s the difference?

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A solid credit score streamlines the process of lender approval for everything from personal loans to credit cards, mortgages, vehicle financing and lines of credit. But where do these scores come from?

Two of the most popular credit scoring services are VantageScore and FICO. Both provide scores ranging from 300 to 850, with higher scores reflecting better credit. Despite their similar number system, there are significant differences in how these credit ratings are calculated, how they’re used by credit bureaus and what they mean for your financial future. Here’s what you need to know about the two systems:

What is a FICO Score?

FICO Scores were developed by the Fair Issac Corporation to help standardize credit reporting and make it easier for lenders to determine an applicant’s risk. It is currently the most widely used credit scoring system. FICO offers different scores for different industries, so your mortgage lender might see something different than your credit card issuer.

What is 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 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 between VantageScore and FICO 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.

But even though the two credit scoring systems use the same numerical range, the numbers will probably still vary because FICO and VantageScore use different criteria to assess potential credit risk.

FICO is historically secretive about their credit scoring algorithm. But according to the website, scores are determined using five key factors:

  • Payment history: 35%
  • Current credit balances: 30%
  • Length of your credit history: 15%
  • New credit applications and approvals: 10%
  • Existing mix of credit accounts and lending products: 10%

VantageScore, meanwhile, uses six factors to create consumer scores:

  • Payment history: 40%
  • Length of credit history and types of credit used: 21%
  • Current credit utilization: 20%
  • Current credit balances: 11%
  • Recent loan or credit applications: 5%
  • Available credit amounts: 3%

VantageScore 4.0 also uses machine learning tools in developing credit scores for consumers with dormant credit histories—those with no activity or updates for six months or more—to help increase the number of consumers who may qualify for credit and make it easier for credit bureaus to assess these dormant borrowers.

Do lenders use FICO or VantageScore?

FICO is the more widely-used credit scoring model. But, lenders are increasingly choosing to assess both scoring services to get a better sense of consumer credit histories and potential risks. While 90 percent of lenders are still using FICO Scores, VantageScore has been gaining significant ground. In 2018, VantageScore estimated a 20 percent increase in adoption.

How to raise your credit score

Having a high credit score and a solid credit history gives you the best chance to get approved for credit at a good rate. While the two models use slightly different criteria, responsible credit usage is the best way to raise your FICO and VantageScore credit scores.

Considering that payment history is a huge percentage of both FICO and VantageScore models, paying on time is the single biggest action you can take to strengthen your credit score.

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. Now through April 2021, you’re entitled to free weekly credit reports, as part of the CARES Act. You can order your free credit reports at AnnualCreditReport.com. You can also purchase a credit report directly from Equifax, TransUnion and Experian.

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.

If you do notice any errors, contact a credit bureau immediately to report it, so it doesn’t hurt your credit score.