What Is the Difference Between FICO and VantageScore Credit Scores?
You may be familiar with the idea of a single credit rating, but there are actually two main providers of credit ratings that assess your creditworthiness: FICO and VantageScore. Although FICO is used for 90% of all lending decisions, VantageScore can still affect whether you get a loan. Here’s what you need to know.
What are FICO and VantageScore credit scores?
FICO and VantageScore are similar in that for the most part your score is scored on a scale of 300 to 850 (versions prior to VantageScore 3.0 range from 501 to 990) based on data collected by three credit bureaus: Experian , TransUnion, and Equifax. …
Although FICO compiles credit ratings based on data from major credit bureaus, it does not collect credit report data on its own. To compete with FICO, the three bureaus created VantageScore in 2006. Both FICO and VantageScore base their scores on your credit history, but they are scored differently :
What does your FICO 8 score do?
- 35% payment history
- 30% debt / debt amount
- 15% age / length of credit history
- 10% types of loans / mix of loans
- 10% loan requests / new loan
What is your VantageScore?
- 40% payment history
- 21% age and type of loan
- Used 20% of the loan
- 11% of the total balance / debt
- 5% recent credit behavior and inquiries
- 3% available loan
Oddly enough, each credit rating has different versions with slightly different weights, like software updates. However, there are points in FICO that are designed for specific situations , such as applying for a mortgage or a car, although it is not always clear which one the lender will use.
What is the difference between the grades?
FICO is used much more often – if you are applying for a loan, credit card, or some other type of financing, the lender will most likely use your FICO score of 8 when reviewing your application. There are other weighting differences as well, as FICO treats all late payments the same, while VantageScore has tighter penalties for late mortgage payments. FICO also pays more attention to your current credit balances than VantageScore, which pays more attention to the length of your credit history and the types of loans you provide. The FICO also compiles a separate score for each of the three bureaus, unlike VantageScore, which only reports one number.
According to the Points Guy , VantageScore is getting more and more popular, but it is mainly used for educational purposes (like the “free credit rating” you get from apps like Credit Karma), credit card prequalification tests, and non-financial grade checks ( for example, an application for an apartment). However, the lender can still use it for other approvals as lenders often use different information to assess your creditworthiness, so you don’t want to ignore it either.
Do I really need to keep track of all my credit scores?
No, because tracking dozens of points is impractical. It is best to keep a close eye on the FICO score provided by your bank ( monthly or even weekly ) and also check your VantageScore from time to time (for example, once a quarter) in case it drops unexpectedly due to missing payments or fraudulent purchases.
You will also want to check your credit reports every few months if you can, especially since you can request them for free until April 2022 here .