Vantagescore in orange on one side and FICO on the other in blue

FICO vs. VantageScore: The Key Differences

Milad Hassibi May 7, 2018


If you have been reading into and learning more about credit scores, then you’ve probably heard of FICO. FICO is short for Fair Issac Corporation which introduced the first credit-scoring tool back in 1989.

The base FICO credit score range is currently between 300 and 850. A high credit score will show that a borrower poses less risk than a someone with a lower score, although lenders may also use some additional in-house underwriting to determine as to whether credit can be offered to the applicant.

VantageScore was first introduced in 2006 and is a joint venture between Equifax, Experian, and A scale with vantagescore on one end and fico on the otherTransUnion.

Although it offers a credit score similar to FICO, the methods it uses to calculate your score are different.

There have been several updates to the formula used by VantageScore, with Version 4.0 retaining a base score between 300 and 850.

Some changes have been made to ensure that the information being presented to lenders is more accurate. Also, the VantageScore credit score range is now similar to FICO’s, with a range of 300 to 850.

Both FICO and VantageScore have updated their methods. Whereas VantageScore release updates to deal with changing demographics, FICO releases updates and additional algorithms dedicated to specific lending programs, such as store cards, auto loans, and mortgages.

Scoring Models

When calculating a credit score, FICO and VantageScore will both use the following criteria:

  • Payment History
  • Credit Usage
  • Length of Credit
  • Types of Credit
  • Recent Enquiries

However, the way in which a credit score is generated by each scoring model differs.

FICO generates a credit score by obtaining millions of anonymous credit reports from the three major credit bureaus and analyzes this information to generate a credit score. The scoring model is broken down into the following segments:

  • Payment History: 35%
  • Credit Utilization: 30%
  • Length of Credit History: 15%
  • New Credit: 10%
  • Credit Mix: 10%

There’s no real way of determining the exact FICO formula, as the key details are kept a secret so the formula can’t be manipulated. However, FICO has been open to providing the main factors that can affect a consumers credit.

It’s also worth noting that FICO has several versions of its scoring method, depending on the line of credit being applied for. The following is an overview of the scoring models used by FICO.

  • Widely Used: FICO Score 8
  • Auto-Lending: Auto Score
  • Credit Card Decisions: Bankcard Score
  • Mortgage Lending: FICO Score 2

How are these unique scores calculated? Depending on the type of loan or line of credit you’re looking for, these unique scoring models give more or less weight to certain factors. For example, an auto lending score for auto loans typically places more weight on payment history.

VantageScore bases its credit score on a combined set of consumer credit files obtained from the same three credit bureaus, Equifax, Experian and TransUnion.

Rather than the segments being broken into percentages, there are some criteria that are more influential when using VantageScore in relation to a FICO credit score. The formula is broken down as follows:

  • Payment History: Extremely Influential
  • Age and Credit Type: Highly Influential
  • Credit Utilization: Highly Influential
  • Total Balance: Moderately Influential
  • Available Credit and Recent Credit Behaviour: Less Influential

VantageScore will also factor in rent, cable, utility and phone bill payments, whereas the FICO model will dismiss these factors.

Both FICO and Vantage offer a similar score of 300 to 850. In the past, VantageScore has issued scores in the range of 501 to 990, but these scores were omitted in the 3.0 version in 2013 to align itself with FICO’s scoring formula.

VantageScore 4.0 is the latest update which uses leveraged machine-learning to achieve a credit score for those who may have a sporadic credit history.

This means that those who have struggled in the past to obtain credit could find that they are now able to generate a credit score if only using the latest version of VantageScore.

The 4.0 update also makes changes as to how scores are calculated, including ignoring medical records that are less than six months old, which ensures insurance companies are given ample time to make a payment in relation to an insurance claim.

This ensures that there is less confusion among those adopting the VantageScore formula, as well as ensuring that consumers aren’t confused by the different scoring methods.

Late Payments

Late payments will impact both your VantageScore and FICO credit score, and both formulas consider the following when crafting a credit score:

  • How recent the late payment was
  • How many accounts have late payments recorded
  • How many payments have been missed on an account

FICO will view all late payments in the same way, whereas VantageScore treats them a little differently. For example, those who miss mortgage payments are likely to receive a lower score in comparison to those who miss a $30 credit card payment.

This can be why there are differences between the FICO and VantageScore results in relation to late payments.

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Credit Inquiries

Its common knowledge that opening multiple credit card accounts and making inquiries on several loans within a short space of time can be bad for your credit score.

This is because every time you apply for a line of credit with a bank, credit union or other lenders, a ‘hard credit check’ will be performed.

A ‘hard credit check’ is when a lender obtains a credit score in relation to credit such as credit cards, a mortgage or a loan. A hard credit check will be performed anytime a consumer enquires about a hard money loan.

In comparison, a ‘soft credit check’ is when records are accessed as part of a background check, and won’t influence the credit score, due to the context of the search.

It’s commonplace that financing is used to purchase vehicles, and it stands to reason that the dealership wants to find the best deal for the customer, but this can result in several inquiries being sent to both FICO and VantageScore.

Fortunately, both VantageScore and FICO take this kind of searches into account and will ensure that any inquiries made within a certain time frame are counted as one.

For FICO, auto loans applied for within a 45-day period will only count as one inquiry.

VantageScore offers a smaller window and allows auto loan credit checks to count as one hard inquiry if they occur within a 14-day period.

Low Balance Collections

Both VantageScore and FICO have penalties in place should an account be forwarded to a collections agency or debt collector.

The difference between the two operators is the way they view collections. While FICO will ignore any collections regarding amounts under $100, VantageScore will record all outstanding amounts.

When a balance has been paid, both VantageScore and FICO will disregard the previously delinquent accounts when providing you with a credit score.

Length of Credit History

To be able to generate a FICO score, applicants will need to have one or more credit accounts that have been open for at least six months. The creditor on the account must report a positive or negative entry in order for your credit score to start.

However, VantageScore can use data extracted from one month of credit history, and a credit account that has been reported on within the last 24 months.

New or infrequent borrowers may find that their credit score varies between the two methods, and this can be one of the reasons why.

What Does a Credit Score Mean?

As well as reflecting how likely it is a lender will offer a line of credit, a credit score can also ensure that the applicant is applying for loans suitable for them and their credit-related situation.

A less than perfect credit score is also a good indicator that you may need to wait for some time to fix your credit before you apply for loans. An overview of credit score ranges follows below:

850 – 750: Excellent
700 – 749: Good
640 – 699: Fair
300 – 639: Needs Work

A personal credit score can be made up of hundreds of records in some instances, so there’s no overall answer as to why a person has been given a certain credit score. You can always get a free copy of your credit score from the government mandated website: www.annualcreditreport.com

Although lower credit score doesn’t ruin your chances of getting a loan, it is likely that you will pay more interest than those with a higher credit score.

Those looking for a loan also need to consider that lenders will take the credit scores provided by FICO and VantageScore and modify them to see if you meet their in-house credit requirements for a specific type of loan.

Which Credit Score is a Lender Likely to Use?

When making an application for any form of credit, there’s little that can be done to determine which formula will be used.

A small financial institution or credit union may only rely on one credit report, whereas a larger lender may use a more complex underwriting process and use all 3 credit reports from the 3 major credit bureaus.

Those applying for a mortgage will find that your FICO score is used in almost every instance. This is because a FICO credit score is required for any mortgages supplied by government-sponsored enterprises, or GSEs.

The main two GSEs are known as Freddie Mac and Fannie Mae.

Freddie Mac is also known as the Federal Home Mortgage Corporation (FHMC) and is located in Virginia.

The GSE was introduced in 1970 and help expand the secondary market in relation to US mortgages.

Fannie Mae is also referred to as the Federal National Mortgage Association (FNMA) that has been in operation since 1968 and is in Washington.

Like Freddie Mac, Fannie Mae was created to expand the secondary mortgage market by creating mortgage-backed securities.

Do Closed Accounts Affect My Credit Score?

Closed accounts act like any other account when it comes to your credit score, so even they will reflect in your overall credit score.

Closed accounts that were paid will evidently only show your ability to repay. However, if one of the accounts was sent to collections, or had a series of late payments, then this information will also be reflected on your credit report and score.

There can also be instances when an account is closed at the request of the lender. This practice will often be enforced should a credit card company feel that the account is being misused or is simply not being used.

Credit card delinquency is a process undertaken should there be multiple missed payments on the account. As such, this form of closed account can mean that the delinquency is also reported back to credit bureaus. A series of delinquent payments will surely impact your credit score.

Even if a debt has been passed over to a collections agency, and the account has since been closed, this will remain on your credit report for up to 7 years.

Are There Different Steps to Improving Each Credit Score?

Given that FICO and VantageScore both calculate credit scores differently, it would be easy to assume that there are different tactics needed to improve each score respectively. However, it’s merely a case of using credit responsibly, which includes but is not limited to the following:

  • Paying your bills on time.
  • Not maxing out your available lines of credit.
  • Correcting any errors on your credit report.

Should you be in the unfortunate position of not being able to meet the payments required, then it’s important to seek help as soon as possible, and speak to your creditors about the problem.

It’s understandable that many may not want to deal with the situation, but the longer it’s left unsolved, the more damage is being done to your credit score as a result. You could end up paying thousands of dollars more in interest per year for a loan.

However, if you have fallen behind with payments in the past, you shouldn’t let this dissuade you moving forward.

Just because a lender may not be able to offer you it’s best rate at the moment, this isn’t to say that it won’t be made available to you in the future when your financial situation improves.

Again, taking control of the situation sooner rather than later means that the situation can be remedied as soon as possible.

Final Note

All in all, most consumers won’t see too much of a variance between their FICO and VantageScore credit scores, due to both companies offering scores between 300 to 850.

If you have less than perfect credit and don’t know where to go, CrediReady can help! Our trusted network of credit repair experts can help you boost your score and qualify for the credit you need. Take a moment to fill out our free no-obligation credit repair inquiry form and start fixing your credit today!



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