Money Research Collective’s editorial team solely created this content. Opinions are their own, but compensation and in-depth research determine where and how companies may appear. Many featured companies advertise with us. How we make money. By Susan Doktor MONEY RESEARCH COLLECTIVE September 9, 2022 You may have heard of the top three credit bureaus: Equifax, Experian, and TransUnion. Financial institutions of every ilk—including mortgage lenders, student loan companies, auto loan providers, and credit
card issuers—will base their credit decisions on the credit scores these agencies provide. The agencies don’t create the scores themselves, but use those of credit-scoring outfits, including VantageScore and FICO. These scoring companies analyze – or “model” – aspects of your credit history in differing ways to arrive at a score that summarizes your creditworthiness. Knowing how the two major scores differ can help you understand what lenders will receive from the credit bureaus and
how that information will affect your chance of scoring that loan or new credit card. VantageScore is actually owned by three credit bureaus: Equifax, Experian, and TransUnion. A VantageScore aggregates your entire credit history, as collected by each of those credit reporting agencies, to come up with a unique credit score for you. Currently, there are two VantageScore models: VantageScore 3.0 and VantageScore 4.0. The two products use slightly
different scoring systems. Your VantageScore, then, may appear as slightly different to lenders, depending on which product the company uses. To simplify matters for lenders, credit monitoring companies also divide credit scores into score ranges, from Very Poor to Excellent. You may fall into a different score range, depending on whether a lender is using VantageScore 3.0 or VantageScore 4.0. New borrowers may fare better with VantageScore than
they would with other credit scores. Unlike some other scores, VantageScore doesn’t require a six-month credit history before a score is assigned or gives you a poor score because you’re new to the credit arena. Borrowers who have an excellent record of making on-time payments may find their VantageScore is higher than their other credit scores. That’s because VantageScore places greater emphasis on your payment history than other bureaus do. That cuts both ways, however: a history of late
payments may depress your VantageScore more seriously than it might your other scores.
What is FICO?The Fair Isaac Corporation began developing the FICO score during the 1970s, and the product itself was launched in 1989. That vintage makes FICO among the first – if not, the first – credit score. By quantifying creditworthiness, FICO helped bring greater fairness to the credit industry and limit abuses such as automatically deeming minority borrowers to be less worthy of receiving loans or credit cards. Pros and cons of FICOIf you don’t have a FICO credit score, it’s possible that lenders won’t quite know what to make of you. Having one at least gets you in the running for borrowing money. FICO bills itself as the credit score lenders use most. Indeed, 90% of consumer lending decisions are influenced by FICO scores. Credit bureaus like Equifax, TransUnion, and Experian actually rely on FICO scoring models to assign you a credit score. To make matters more complicated, each of those bureaus may not be using the same FICO scoring model in their calculations. So it’s likely you have multiple FICO scores, which may differ from one another. It’s a good idea to know your FICO score. Many banks offer their customers access to FICO scores for free, as a courtesy. When you check your own score, it doesn’t count as a hard credit inquiry, and so the requests will not affect your standing.
What is the difference between a FICO score and a VantageScore?Both FICO and Vantage use the same five factors to calculate your credit score, but use them a little differently. To earn higher credit scores, then, it’s important to understand those criteria, which are:
Payment historyYour record of making timely payments is the single most important factor in shaping your credit score. Nothing is more damaging to your credit record than making late payments. And nothing can help you raise your credit score as readily as beginning to pay all of your credit accounts on time. Depending on which credit modeling system a credit bureau uses, your payment history can make up 40% of your score. That’s the weighting used by VantageScore for payment history, and FICO emphasizes it nearly as much, at 35%. Credit utilization rateProspective lenders like it if you don’t use all the credit that’s available to you. In turn, credit scoring systems reward this restraint by including a calculation of what’s known as your credit utilization. Every credit card, home equity line of credit, store charge and personal line of credit you receive comes with a credit limit. If you add up all of the money credit companies are willing to lend to you, and then subtract from it the credit dollars you’re using now, the resulting number is your available credit at the moment. If you then take your total credit limit and divide that sum by the amount of credit you’ve actually used, you’ll come up with your credit utilization rate. To maintain a healthy credit score, experts advise you to keep this rate below 30%. Using more of your available credit than that makes you riskier in the eyes of a lender and you won’t be offered the lowest interest rates. Length of credit historyCredit bureaus tend to issue higher credit scores not only to those who use their credit responsibly, but have done so for a long time. The longer that period of reliable use of the credit, the better. That’s why it’s wise to apply for credit as soon as possible, and begin to use it responsibly, in order to build a positive credit history. Those who have proven over time that they can borrow within their means and manage credit effectively are often rewarded with higher credit scores. Of course, it can be difficult to get credit when you’ve never had credit before – which is one of the ironies of personal finance. One option, in the absence of such a history, is to essentially self-lend for a time. You take out a secured credit card — one you fund with a deposit of your own cash — and then pay its bills in a timely manner, which signals to the credit scorers that you’re a responsible borrower. In time, you should be able to use that track record – and resulting credit score – to apply for a secured credit card. Gas station and store credit cards offer easier approval than general purpose credit cards like Visa and MasterCard. Types of credit (and credit mix)Credit scores reflect your track record with several types of credit: installment, such as mortgages and loans; revolving, such as credit cards; and open credit, such as lines of credit secured by an asset such as a home. Credit bureaus reward borrowers who have a mixture of these credit types. Yet they pay particular attention to installment and revolving credit. With installment credit, you borrow a lump sum of money and pay off your debt with equal payments over a specified term. With revolving credit, you can borrow money at various times in your life. You must make a minimum monthly payment, but the amount you choose to pay can vary from month to month. Revolving credit is best represented by general-purpose credit cards and retail store charge cards. Hard inquiries (recent credit behavior)Each time you apply for new credit, the credit issuer will request (or “pull”) a copy of your credit report from one or more credit reporting agencies. These requests are known as hard inquiries. Hard inquiries become part of your credit file. Some hard inquiries, therefore, are inevitable when you’re trying to build your credit. Each hard inquiry has the potential to depress your credit score, but only by about five points. The dip is temporary and your score will recover within a month or so. However, having too many hard inquiries on your account, and for multiple credit products, can decrease your credit score more significantly and for a longer time. That’s because credit bureaus see multiple hard credit inquiries over a short period – and for different credit options – as a warning sign that you may be experiencing financial troubles, and are trying to solve them by borrowing more money. Only apply for new credit, then, when you absolutely need to do so. Further, try to time your credit applications so they’re about six months apart. One way people get in trouble is by taking advantage of too many “10% off your first purchase” credit offers. Saving a few dollars here and there isn’t worth the damage your score will suffer due to multiple hard credit inquiries. Ads by Money. We may be compensated if you click this
ad.Ad What's your credit costing you? If questionable negative items are hurting your credit, removing them can improve your score. Click below to see how a credit repair company can help! Repair My Credit VantageScore vs FICO FAQsAre VantageScores higher than FICO scores?chevron-down chevron-up Your scores from each credit bureau will likely be within a few points of one another. Both credit bureaus use five of the same criteria to figure out your score. But each gives a slightly different weight to each factor in its calculations. (For example, as mentioned above, VantageScore weighs your history of on-time and late payments at 40% while FICO gives your payment history a value of 35%.) In addition, FICO looks at your debt in two ways: as a percentage of your total credit limit, and in light of your total available credit.This last factor is not as highly influential as other criteria. FICO scores are more strongly influenced by the length of your credit history. It will take you longer to earn a FICO score. Typically, you'll have to have six months' worth of credit activity before you'll get a FICO score, while you may earn a VantageScore within a month of making a credit purchase. Do lenders look at FICO or VantageScores?chevron-down chevron-up It depends on the lender. Some may look at one or the other while others may look at both. According to FICO, whose scores are the older tool, a full 90% of consumer credit decisions are made using FICO scores. But that's not to say those same decisions aren't also influenced by a borrower's VantageScore. What is the FICO score range?chevron-down chevron-up FICO and VantageScore use different ranges to assign you a credit designation from Very Poor to Excellent. You'll have to earn a score above 800 to get an Excellent rating from FICO. Here are the details for FICO ranges:
What is the VantageScore range?chevron-down chevron-up It's easier to land in a higher range with VantageScore compared with FICO. Here's the range for VantageScore:
Summary of our guide to VantageScore vs FICOVantageScore and FICO share many similarities. But FICO is the score most widely used by lenders. So that’s probably the best score to focus on if you want to have access to better loan interest rates. You can check your FICO score in a few different ways. Perhaps the easiest way is to check with one of your credit card companies. Here’s list of credit issuers that offer access to FICO scores as a perk to their customers:
In addition, many banks, too, offer free FICO scores to their customers. If you bank online or use mobile banking, examine your bank’s website and banking app for details about such a service. You can also sign up for a service like Credit Karma, which offers near-daily updates to your credit report and scores from several credit bureaus, including FICO and VantageScore.  Susan Doktor, senior writer at Money.com, is a journalist, business strategist, and veteran homeowner. She writes on a wide range of personal finance topics, including mortgages, real estate, and home improvement. Follow her on Twitter @branddoktor. Which is more accurate VantageScore or FICO?Which credit score will a lender check when you apply for a loan? Although VantageScore credit scores have been around for about 15 years, the FICO Score is still the preferred choice of most lenders. In the U.S., lenders use FICO Scores in 90% of lending decisions.
How much lower is VantageScore than FICO?From 2017 to 2021, the average American's VantageScore has been about 21 points lower than the average American's FICO score. However, the two scoring systems have different benchmarks for determining a “good” credit score, so this doesn't mean that your FICO score is “better” than your VantageScore.
Is VantageScore similar to FICO?FICO uses a 45-day span, while VantageScore uses 14 days. And while FICO only includes mortgages, vehicle loans and student loan inquiries, VantageScore will do the same for hard inquiries dealing with other types of credit, including credit cards.
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Whats the difference between vantagescore and fico score
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