FICO® vs. VantageScore®: What’s the Difference?
FICO®, the Fair Isaac Corporation, introduced its FICO® scoring system back in 1989 and has been working synonymously with mortgage, credit card, and lending companies ever since. Recently, FICO®’s dominance has been challenged by VantageScore®, which is a result of the collaboration between the three major credit reporting agencies (CRAs) – Experian®, TransUnion® and Equifax®. Although FICO® and VantageScore® use similar scoring methods, they both have slightly different results.
1. Different Scoring
Remember that FICO® and VantageScore® aren’t the only scoring models, some lenders use a multitude of scoring methods, but these two will most likely be the only scores you’ll see. Both rate using the same basic criteria:
- Payment history
- Length of credit
- Types of credit
- Credit usage
- Recent inquiries
BOTH FICO® and VantageScore® consider the same information. The DIFFERENCE is they gather their data in different ways. FICO® bases its scoring on credit reports from millions of consumers at once, gathering reports from bureaus and anonymous consumer data to generate and accurate scoring model. VantageScore® uses a combined set of consumer credit files and from three credit bureaus to come up with their formula. VantageScore® and FICO® both issue scores ranging from 300 to 850.
2. Varied Scoring Requirements
FICO® requires at least six months of credit history and at least one account reported to a CRA within the last six months. VantageScore® allows a shorter credit history and a long period for reported accounts.
3. Late Payment Significance
Having a history of late payments will impact BOTH of your FICO® and your VantageScore®. Both models consider the following:
- How recently last late payment occurred
- How many account have had late payments
- How many payments you’ve missed on an account
- FICO® treats ALL late payments equally. VantageScore® judges late payments differently, penalizing late mortgage payments more harshly than other types of credit.
4. Credit Inquiry Significance
Remember that every time you apple for a credit card or need to open a line of credit for a car loan, etc. the lender does a “hard inquiry” to check your credit. VantageScore® and FICO® both penalize consumers who have multiple hard inquiries in a short period of time and they both do “deduplication” – where your application may be sent to multiple lenders (resulting in multiple inquiries). Both models do not count each inquiry separately. FICO® uses a 45 day span to deduplicate your inquiries. VantageScore® limits it to a 14-day range. FICO® considers only mortgages, auto loans and student loans.
5. Low-Balance Collection Significance
VantageScore® and FICO® both have penalties for accounts sent to collection agencies. FICO® may give you more of a break when it comes to low-amount collection accounts. FICO® (Versions 8 and newer) ignores all collection where the original balance was under $100 and doesn’t count collections you’ve paid off. VantageScore® ignores only paid collections, regardless of the original balance.
Regardless of the differences, essential advice for keeping your credit score high remains the same:
- Avoid late payments
- Keep balances low
- Apply for new credit only when you have to