Different consumer credit organizations utilize VantageScore and FICO scores, two credit scoring algorithms, to determine a person’s creditworthiness and capacity to repay a loan. While there are some similarities between the systems, there are also some fundamental distinctions that mean not all credit data is treated similarly. As a result, the ratings from each model varied somewhat.
History of the Vantage Score and FICO scores
The first practical FICO credit scoring model was developed by the Fair Isaac Corporation (FICO) in 1989. As of 2006, the Vantage Score approach is still relatively young. Experian, Equifax, and Transunion, the three largest credit agencies, collaborated to establish it.
According to estimates from Fair Isaac Corporation, 90% of lenders utilize FICO ratings when deciding who gets the credit. Over 2,200 financial institutions receive their credit scores from Vantage Scores.
Both models are similar in that they aim to forecast consumer behavior and their capacity to repay loans. But there are some fundamental disparities between them.
Criteria For The Vantage Score and FICO score
A unique credit score is generated by Vantage Score and FICO using information from consumer credit reports. But each system has a somewhat different methodology for arriving at these numbers. The relative weights that each element receives vary amongst the scoring models as well.
Credit information is divided into six key categories by Vantage Score credit scoring models, each of which has a different amount of importance:
- Payment history: a major factor
- Age and credit type are very important factors.
- The overall proportion of credit consumption is quite important.
- Total amount due on credit and debt – somewhat significant
- Less influential recent credit behavior
- Credit availability is less significant.
Each of the five categories that make up FICO scores for credit data has its own relevance value expressed as a percentage, thus the significance of a given piece of information will vary depending on which category it belongs to. The groups and their significance are as follows:
- 35% in relation to past payments
- 30% of total debt is owing
- 15 percent of credit history’s age
- 10 percent for new credit
- Credit percentage: 10%
As you can see, the information used by these models and their significance level is mostly comparable.
Ranges for Vantage Score and FICO
Over time, FICO and Vantage Score have both been modified, and FICO has even changed to reflect changes in ratings for particular industries. Here are their typical score ranges after that.
FICO categorizes the following broad credit score ranges:
- 800+ – Outstanding
- 740 to 799 – Excellent
- 670 – 739 – Good
- 580 – 669 – Fair
- Poor: 579 and below
Although the numbers are slightly different, Vantage Score models now deal with comparable score ranges:
- 750+ – Outstanding
- 700 – 749 – Good
- 640 – 699 – Fair
- 300 to 639 – Improvement required
It is simpler for individuals to compare their FICO and Vantage Score credit ratings because of the comparable ranges.
What Distinguishes The Vantage Score and FICO scores?
The two scoring models have certain characteristics in common, but they also differ in significant respects.
History Of Credit Used
The quantity of credit information required to obtain an accurate score is, by far, the most significant distinction between the two scoring algorithms.
An individual must have one or more accounts that have been open for at least six months and at least one account that has been reported to at least one of the three main credit bureaus within the previous six months in order to obtain a FICO score. FICO won’t provide a score if these conditions aren’t met.
The Vantage Score methodology was created in part to address this problem and make it simpler for customers to obtain results. Consumers with just one month of account history and one account that has been reported to at least one of the three main credit agencies during the previous 24 months may be eligible to get ratings using the Vantage Score methodology.
These less stringent restrictions could make it possible for persons with a little credit history or those who haven’t used credit in a while to get credit scores when they wouldn’t typically be able to do so.
Dealing with credit inquiries may be a burdensome task. Multiple credit inquiries can, on the one hand, lower your credit ratings. Contrarily, a high number of credit inquiries shows that you are looking about for the best loan conditions or interest rates, which may help you save money and improve your financial situation.
Vantage Score includes numerous inquiries—for any form of credit—made within a 14-day window as a single inquiry to avoid this double-bind effect. This significantly reduces the effect that these credit queries have, which motivates you to compare rates.
This is also done by more recent FICO score algorithms, but to a little lesser extent. Within a period of 14 days, they will count each inquiry for the same credit type as one. Therefore, if you apply for five new credit cards in a period of 14 days, it counts as one inquiry; but, if you also apply for a personal loan during that time, it counts as two inquiries.
Data On Trends
A credit score is comparable to a snapshot taken at the time the scores are generated of a person’s current credit profile. In actuality, credit scores are continually changing as a result of the expiration of older data and the influx of new data.
This data may be evaluated differently by each model. For instance, FICO scoring algorithms solely use disclosed information regarding borrowing and credit use for calculating the scores.
On the other hand, Vantage Score includes information that could suggest a pattern over time. Up to two years’ worth of historical data on expenditure and credit use may be included in a new score.
Having said that, you shouldn’t get caught up in these little variations and instead concentrate on developing good credit habits and allowing your score to take care of itself.
additional civil judgments and tax liens
Many tax liens and civil judgments have lately been deleted from consumer credit reports as a result of recent modifications to the public record reporting rules. Any associated tax liens are no longer given as much weight in the Vantage Score 4.0 grading methodology to reflect these changes. They may, though, nonetheless be taken into account by FICO scoring algorithms and significantly affect credit ratings.
How Can I Obtain My FICO or Vantage Scores?
When you apply for a loan or line of credit, a lender will offer you a copy of your credit scores, but there are other places you may go to find out your Vantage Score or FICO scores, such as credit bureaus, charitable organizations, personal financial websites, and nonprofit credit counselors.
Be aware that while some services give your results for free, certain organizations demand money to obtain them.
Although the Vantage Score and FICO scores have minor variances, it is more crucial to concentrate on their commonalities. Both contribute to the generation of credit scores that lenders use to assess your creditworthiness. Both utilize data that is quite similar to one another and grade it similarly.
The most crucial thing is to concentrate on developing solid patterns out of sound credit behavior. No matter the scoring mechanism you employ, this will result in the highest possible score for you.