FICO vs. VantageScore: What’s the Difference
Does this sound familiar? You spend hours and hours learning the ins and outs of the FICO credit score to the point where you feel confident you know precisely how any change to your credit file will impact your score. Then you hear there’s a totally different measure called a VantageScore. You throw your hands in the air and consider just giving up.
Without a doubt, it can quickly become bewildering trying to keep track of the myriad scores out there. But to simplify things, it helps to know that there are two main sources of scores for lending decisions, like a car note or taking out a mortgage or personal loan. Those sources are Fair Isaac Corporation, which makes the FICO score, and the three credit bureaus—Experian, Equifax, and TransUnion—who generate the VantageScore.
So what’s the difference between the scores?
When you get a score
With FICO scores, you must have at least six months of payment history before a score is generated. You also need some activity on your accounts in the last six months. However, when it comes to VantageScore, all you need is one month of payment history before a score will be calculated for you.
The ingredients that go into a FICO score are as follows:
- Payment history (35%)
- Credit utilization (30%)
- Length of credit history (15%)
- New credit (10%)
- Types of credit used (10%)
For a VantageScore, it’s:
- Payment history (41%)
- Length and types of credit (20%)
- Credit utilization (20%)
- Credit balances (11%)
- Recent credit applications (6%)
- Available credit (2%)
Relative scoring for the same information
While both scores now use the same 300-850 range, various sources have found that VantageScores tend to be about 50 points higher for the same information, on average.
It’s important to compare apples to apples with any lender you’re discussing an application with. For example, they may want you to have a 760 score to qualify for the best interest rate on a loan, but if you’re looking at a VantageScore and they’re looking at FICO, you might not be getting the rate you thought you were.
When you apply for a loan or credit, a hard inquiry is generated, and the lender accesses a copy of your credit report to consider your application. If you have too many inquiries, this can negatively impact your credit score in both models. To minimize this effect for people shopping for a car loan, mortgage, or student loan, in its more recent scoring models, FICO has counted all of these inquiries as a single inquiry if they happen during a 45-day window. VantageScore narrows that window to just 14 days.
Current estimates are that around 90% of lenders use the FICO score. But keep in mind that number used to be higher. VantageScore is gaining market share.
It’s also important to understand that you have separate VantageScore and FICO scores from each of the three credit bureaus and that there are different versions of each score that emphasize specific components more than others. For example, when you apply for a car loan, the lender might look at a FICO score that puts a heavier emphasis on past auto payments.
Helpfully, the fundamental factors that give you a good score are essentially the same in all models. So as long as you make payments on time, keep your balances low on revolving accounts, keep older revolving accounts open, limit credit applications, and diversify your credit, you’ll be fine.
Now that you know the differences and similarities between the scores, how do you know which one to focus on? It’s pretty simple: ask your lender. Once you know the score they’re using, you know which one to track. If your financial institution or credit card provider doesn’t offer you a free score, you can access your scores at myfico.com and vantagescore.com.