The FICO vs Vantage Credit Scores

Report on a table

There are defining differences between the FICO vs Vantage credit scoring models. Most credit industry professionals consider FICO to be the “real” score because it is used by 90% or more of lenders. Because lenders almost never use VantageScore for making loan approval decisions, it is often called a “FAKO score”. (Pronounced like “fake-o”.)

Free credit score apps like Credit Karma and Credit Sesame normally give you your VantageScore. So how useful is it? And how are the two different?

Do Lenders Use FICO or VantageScore?

FICO enjoys a first-mover advantage and remains the industry leader by far. It is used by about 90 percent of lenders. But VantageScore has been gaining market share perhaps in part because it is backed by the largest credit card reporting companies.

VantageScore and base FICO models are both generic and therefore used by a diverse range of creditors including card issuers, online lenders, and private student loan companies.

Nevertheless, FICO offers industry-specific bankcard and auto scores which have the base FICO model at their core but are customized for these industries. There is also a slight variation in the FICO score models used by each of the three leading credit reporting agencies.

Whereas you can easily get a free credit score from VantageScore through multiple sources, you normally have to pay to get access to your FICO credit scores.

Before going further, a quick note. Usually your FICO score and your VantageScore will be about the same. So getting a free VantageScore is better than nothing, and it gives you a good ballpark idea of how your credit is doing.

However, they can vary significantly. For that reason, I recommend that you look at your FICO scores if you’re about to apply for a loan or a credit card, since one of your FICO scores will probably be used to determine your eligibility for the loan you’re applying for.

Criteria of VantageScore and FICO Score Calculation

Both the FICO and VantageScore use a credit score model software that analyzes credit reports to generate credit scores. For both companies, the overarching goal is the same; predicting the probability of the person falling at least 90 days behind on a bill within the next two years.  

Your credit rating is determined by several factors. Every factor that causes your credit score to go up or down is found in your credit report.

You are awarded a certain number of points depending on the information the credit scoring model finds. For example, zero late payments would see a specific number of points added to your score.

These scoring factors may be broadly classified as follows.

1. Credit Utilization

Your credit usage is how much of the credit available to you that you are currently using with your credit cards and other revolving credit accounts. It also factors what you owe in installment loans though it considers this to a significantly lesser extent.

The credit utilization rate is the total of all your credit card balances divided by the credit limits available on those accounts. So if your credit limits total $20,000 and your balances are $15,000, your credit utilization is 75 percent.

But there are differences in how scoring models and model versions evaluate credit utilization.

VantageScore 4.0 looks at your past utilization to determine whether you pay your credit card bills in full or make minimum payments. VantageScore 3.0 and below as well as all FICO score models do not factor such tended utilization.

2. Payment/Credit History

This takes into account whether you have made your payments on time or if your payments are late, accounts are in collection, you have debts in default, or have declared bankruptcy.

Note that while unsettled collection accounts hurt both VantageScore credit scores and FICO scores, the scoring models and model versions treat them differently.

For example, FICO Score 8 does not distinguish between medical and non-medical accounts nor does it disregard paid collection accounts. On the other hand, FICO Score 9 places less emphasis on unpaid medical collections than it does on other unpaid collections. It also overlooks paid collection accounts.

Both FICO Score 8 and FICO Score 9 disregard collection accounts if the original account’s unpaid balance is below $100.

VantageScore 3.0 and 4.0 do not factor paid collection accounts. They also assign less weight to medical collections. The two VantageScore versions do not however exempt low-balance collections.

3. Age of Accounts

How long have you been managing your credit accounts?

4. Diversity of Accounts

Do you have experience managing different types of credit accounts?

5. Hard Credit Inquiries

Have you recently applied for new credit accounts that necessitated hard inquiries? When you apply for a new account, lenders will pull your credit report and this could affect your score albeit temporarily. More on hard credit inquiries in a section further down.

Factor Weight

VantageScore and FICO models assign different weights or values to the information they find on the credit report. The same report may therefore earn you different points depending on the scoring model used. The factors are weighed as follows:

Base FICO Calculation

  • Payment history: 35 percent
  • Credit utilization: 30 percent
  • Length of credit history: 15 percent
  • Current credit mix of lending products and credit accounts: 10 percent
  • New credit account applications: 10 percent

VantageScore Calculation

  • Payment history: 40 percent
  • Length of credit history and types of credit: 21 percent
  • Credit utilization: 20 percent
  • Credit Balances: 11 percent
  • New credit or loan application: 5 percent
  • Available credit amounts: 3 percent

So if you have high credit utilization, your loan application may have a higher shot at getting approved by a VantageScore-using lender than it would with a creditor who depends on the FICO scoring model.

FICO and VantageScore occasionally update their models to factor changes in consumer behavior as well as evolving industry, information, and technology practices.

For example, VantageScore 4.0 leverages machine learning algorithms to develop credit scores for consumers who have had no account activity for six months or more. This makes it easier for a lender and credit bureau to assess consumers with dormant histories.

Different Score Ranges

Base FICO scores range between 300 and 850. Initially, VantageScore used a different scoring scale from 501 to 990.

However, later versions of VantageScore adopted the same 300 to 850 range that FICO uses. But even though both models now have the same scale, your score will usually vary since VantageScore and FICO assess credit risks using different criteria.

Lenders do not always interpret the two types of scores the same way. The definition of a good credit score does not just vary depending on the credit scoring model but also from one lender to the next.

For instance, a FICO score of 670 may qualify you for a credit card from one bank. However, you may require a VantageScore of 680 to be issued with a card by a different bank.

Here is a general guide on how your VantageScore and FICO score might be categorized by lenders.

FICO vs. VantageScore

Rating

VantageScore Range

FICO Score Range

Excellent/Exceptional

781-850

800-850

Good/Very Good

661-780

740-799

Fair/Good

601-660

670-739

Poor/Fair

500-600

580-669

Very Poor/Poor

300-499

300-579

Note that while base FICO scores range from 300 to 850, industry-specific FICO scores start from 250 and can go all the way to 900.

Length of Credit History Required

Not everyone qualifies for a consumer credit score. To receive one, you must meet each credit score company’s minimum criteria.

For the FICO score, your report must show a tradeline (also known as an account) such as a line of credit, loan, or credit card. The tradeline should be at least six months old. One or more of the tradelines must have had some activity over the previous six months.

Eligibility for the VantageScore is less stringent. It can score consumers who use credit less often or are new to credit.

The credit report must have at least one tradeline irrespective of the age of the account. VantageScore can use just a month’s credit history and a single credit account reporting within the preceding 24 months.

If you are just getting started on credit or have not used a credit account for a while, you might have a VantageScore but no FICO credit score.

Tax Liens and Civil Judgments

A number of changes to the use of new and existing public records in credit reporting were first rolled out in July 2017. It followed a CFPB study that found various problems with consumer credit reporting.

The changes had repercussions on the kind of information sent to a credit reporting agency. As a result, many civil judgments and tax liens were removed from credit reports.

Tax liens are not given as much weight on credit scores in VantageScore 4.0 though they do still have an impact. Tax liens can still affect FICO scores.

Credit Inquiries

A credit inquiry is a lender or creditor’s request for your credit report. Credit inquiries are a catch-22. When you apply for a new credit account, you need a good credit score to get a good rate. However, the lender’s inquiry of your credit history can itself lower your credit score.

Credit inquiries may be soft or hard. A soft inquiry includes a request for your credit report or a lender requesting your credit information before making a pre-screening offer.

A hard inquiry occurs when a lender looks at your credit file when you apply for a credit account. It is added to your credit report. A hard inquiry lowers your score though this is usually only in effect for less than twelve months.

Credit scoring companies recognize comparing your loan options is financially savvy and not necessarily indicative of risky behavior.

The latest FICO versions FICO 8 and FICO 9 have a 45-day window for same-type inquiries though older versions use a 14-day window (older FICO versions FICO 2, FICO 4, and FICO 5 are still used by mortgage lenders).

This window is not applicable to all hard inquiries. It covers mortgage, auto loans, and student loan applications only. The 45-day window is helpful when you are contemplating taking a major loan and are shopping around to get the best offer.

VantageScore treats multiple hard inquiries that occur within a 14-day window as a single hard inquiry. Unlike FICO, these inquiries do not have to be for the same loan type.

That means multiple inquiries on your credit file for the same type of credit would have a worse impact on your Vantage credit score than your FICO scores.

Conclusion

With both the VantageScore and FICO models, the higher your score, the better. A higher score makes it easier for you to qualify for competitive offers from lenders.

Build a good credit history and you will have a better chance at improving both your VantageScore and FICO scores.

Frequently Asked Questions

Is FICO higher than Vantage?

No. Both models have a credit score range of 300 to 850.

Do credit card companies use FICO or Vantage?

Most credit card companies use FICO credit scores. About 90 percent of lenders use FICO credit scores.

Do mortgage lenders use FICO or Vantage?

Most mortgage lenders use FICO credit scores. About 90 percent of lenders use FICO credit scores.

Do any lenders use VantageScore?

Yes. In 2018, VantageScore reported a 20 percent increase in adoption.

Leave a Comment

Your email address will not be published. Required fields are marked *