FICO vs VantageScore
When it comes to credit scores, there are multiple types you should be familiar with. In this article, we are going to discuss the two most popular scoring models- FICO score vs VantageScore- to see how they compare.
The FICO score and VantageScore are the two most popular credit scoring models in use today. While both of them can give you a good general idea of your creditworthiness, there are some important differences between them.
FICO is older and has been in use for quite some time, whereas VantageScore is newer and not yet widely accepted by lenders.
While new VantageScore version has the same range as FICO- from 300 to 850. Older VantageScore versions had a range from 501 to 990.
Another notable difference is how scores are calculated. The FICO score looks at five factors:
- Payment history
- Credit utilization
- Length of credit history
- New credit accounts
- Types of credit accounts
The VantageScore, on the other hand, looks at six:
- Payment history
- Age and type of credit accounts
- Credit utilization
- Total balances owed
- Recent credit activity
- Available credit
These factors are more or less the same but they are weighted differently to calculate the final score.
Lastly, you should know that you can have multiple FICO scores, one for each type of credit account. On the contrary, you can only have one VantageScore.
What Is a FICO Score?
A FICO score is a type of credit score most widely used by lenders in helping them determine whether to give money to a borrower or not. It is developed by Fair Isaac Corporation and has multiple types such as FICO Auto score, FICO bankcard score, FICO Score 8, etc.
This score is represented as a three-digit number that can range from 300 to 850, where higher numbers indicate a lower risk of defaulting on a loan. Categories for FICO scores are:
- From 300 to 579- poor
- 580 to 669- fair
- 670 to 739- good
- 740 to 799- very good
- 800 to 850- exceptional
Many lenders will be willing to give a loan to a borrower with a score of 720 or higher. Even if you do not fall into this category, you may still be able to get a loan but with higher interest rates.
FICO score is based on many factors we listed above, with payment history and credit utilization being the two most important ones.
What Is a VantageScore?
VantageScore is a credit score that was created by the three major credit bureaus as an alternative to a FICO score. It is used less than FICO but has growing popularity with many lenders switching to VantageScore vs FICO score.
The range is the same, from 300 to 850 and categories going from very poor to excellent.
We already talked about factors going into VantageScore but it’s important to mention that it gives more weight to recent credit activity than FICO does. This means that if you have been managing your credit well over the past few months, your VantageScore will be higher than your FICO score.
Don’t forget that even your utility payments and cell phone bill can impact the score because it considers all types of credit accounts.
A VantageScore is calculated using information from all three major credit bureaus, while a FICOScore is only calculated using information from one bureau. Considering this, your VantageScore can be more accurate if there is limited credit history.
FICO vs. VantageScore: What’s the Difference?
While they both intend to predict future credit risk, they are not the same. Here’s a quick overview of the main differences between the two most popular credit scoring systems.
First and foremost, they use similar information to calculate your score but weigh factors differently. FICO gives more importance to your payment history than VantageScore. So, in case you made a couple of your payments late, your FICO score will be lower.
VantageScore on the other hand takes more into consideration your total credit usage and balance.
Another key difference is what is looked at as a good score. In FICO, everything above 740 is considered really good while for VantageScore is 661 and above. Simply, it’s easier to achieve a good VantageScore than a FICO score. To answer a question, which is higher FICO or VantageScore, the answer depends on many personal factors regarding your credit history.
These scores may look similar to you but there are no easy FICO vs VantageScore conversions and if you need this, we suggest you contact your bank.
Which Credit Score Do Lenders Usually Use?
If you are wondering who uses VantageScore vs FICO score, the simplest answer is most lenders. FICO is an older system and it’s been around for some time and many lenders haven’t yet considered switching to VantageScore.
In case you want to know your scores, you should visit your bank as they can provide VantageScore vs FICO score calculator.
Don’t forget there are other credit scores in use. Your chosen lender may use another type but that is not that likely. In general, all systems take into consideration similar factors and just weigh them differently. You can always talk to your lender and find out what type they use in determining whether to give you a loan or not.
Why Does a Credit Score Matter?
Credit scores are used by lenders to determine how risky giving a loan actually is. The higher your score is, the lower risk is for a lender. A bad score can make it difficult to get approved for any kind of financing.
If your score is in a good range, no matter the scoring system your lender uses, it’s likely you will be able to negotiate better terms and lower interest rates. They will see your loan request as a low-risk investment and be open to talking to you.
How to Improve Your Credit Score
It’s essential you first understand different factors influencing your score. Once you get a grasp on those and get familiar with your current scores, it’s important to know you can better them.
There are a few things you can do to improve your credit score, regardless of which scoring model is used. First, be sure your bills are always paid on time. All your payment history is being documented and is one of the most important factors influencing your total score. Second, keep your credit utilization low. This means that you should use less of your available credit. We recommend you keep it under 30%. Lastly, if you have any old credit accounts, don’t close them. This can impact the length of your credit history and credit scoring models like to see longer history of managing credit accounts, especially with lower balances.
No matter what scoring system your lender uses, it’s important to get familiar with both. Knowing the differences gives you an opportunity to maintain them both in check and to keep in mind what can affect them.
If you are for example in the market to buy a new vehicle the chances are your lender will consider auto VantageScore vs FICO score in order to determine how likely are you to halt the loan. Be sure to talk to your financial advisor before applying for any loan as it can help you find out which score you need to approve and how to do it.