The weight that is given to each of your credit factors is determined by the scoring model that is being used. There are two different credit scores that can be used to determine how creditworthy a person is. Both of these scores are intended to be between 300 and 900. The FICO Score and the VantageScore both use a credit scoring range that ranges from 300 to 850, with higher numbers indicating greater creditworthiness. You will have a better understanding of how these credit scoring models function if you familiarise yourself with the primary distinctions that exist between the FICO score and the VantageScore.
What Makes FICO and VantageScore So Different from One Another?
FICO s a publicly-traded company that was established in 1956. In 2006, the three largest credit bureaus formed an LLC together called Vantage ScoreThe criteria for scoring
FICO-History dating back at least six months for at least one of the accounts ("tradeline") Vantage Score- There is no set minimum for the length of a credit history; however, you must have at least one account.Weighting
FICO- Explicit percentage breakdowns for each of the five primary categories Vantage ScoreDescriptions of the "level of influence" for each of the five categoriesThe handling of difficult inquiries
FICO- Multiple inquiries will be treated as a single inquiry if they are received within a period of forty-five days. Vantage Score- If multiple inquiries are made within a 14-day period, we will treat them as a single inquiry. Score range between 300 and 850 for both FICO and Vantage Score.Company
The company that was formerly known as Fair, Isaac & Co. and was established in 1956 came up with the concept of the FICO score in the 1980s. The company's former name was Fair Isaac, but it is now known simply as FICO. The FICO score was developed with the intention of assisting lenders in determining which borrowers had a greater propensity to default on a loan. The most recent version of the FICO Score is 9, but version 8 is still the one that is most commonly used. Additionally, FICO generates individual scores for auto loans, credit card applications, and mortgage applications. The three largest credit reporting companies—Equifax, Experian, and TransUnion—joined forces and established a joint venture called VantageScore Solutions LLC in 2006. That same year, they launched VantageScore 1.0. VantageScore was born out of this partnership. The three companies that are responsible for reporting consumers' credit information are sometimes referred to as credit bureaus. VantageScore was developed to ensure that the credit scores provided by these companies are consistent with one another. Since it was first developed, the VantageScore system has been updated a total of four times. The Criteria for Scoring In order to generate a credit score, the FICO scoring model requires the existence of at least one account or tradeline that has been in good standing for a period of at least six months. In addition to this, your account must have had recent activity within the past half a year. The credit scoring model used by VantageScore only requires one account or tradeline to function, and there is no minimum required length for the credit history. Weighting While the most recent version of VantageScore places a greater emphasis on total credit usage and balances, FICO places a greater emphasis on payment history. The credit scoring formula used by the FICO score is based on five different categories of information, whereas VantageScore 3.0 uses six different categories. Five different categories are used in VantageScore 4.0.FICO Score
35 per cent of the history of payments 30 per cent of total debt and amounts that are owed 15 per cent the applicant's age and the length of their credit history 10 per cent of various types of credit and combinations of credit 10 per cent of new credit applications and inquiriesVantageScore 3.0
40 per cent of previous financial history age and type of credit account for 21 per cent of the total. 20 per cent of the total amount of credit utilised 11 per cent total balances/debt 5 per cent of recent activities and inquiries regarding credit 3 per cent available credit The scoring criteria were modified slightly with the release of VantageScore 4.0, which consolidated the factors and assigned a lower weight to payment history. In addition to this, it does not provide a percentage for each criterion; rather, it states the degree to which each factor contributes to the overall result.VantageScore 4.0
The total credit usage, the balance, and the available credit all have a significant impact. Credit mix and experience are extremely important factors. The history of payments is moderately influential. Age of credit history is a factor that carries less weight. New accounts are significantly less influential. The payment history takes into account any missed payments, taking into account both the amount of the missed payment and how recently it occurred. The age of your oldest account, the age of your newest account, and the average age of all of your accounts are typically considered when evaluating your credit history, in addition to how long it has been since you used each of those accounts. Your credit mix is comprised of the various forms of credit that you have made use of, such as bank credit cards, retailer credit accounts, instalment loans, finance company accounts, and mortgage loans. Recent credit behaviour and new accounts involves determining whether or not you have recently opened a number of new credit accounts. Potential creditors will pull your credit report in order to determine whether or not you are creditworthy for the loan or other line of credit that you have requested. You should be aware that a credit score that you obtain on the internet will probably not perfectly match the one that the lender receives; however, it can still provide you with a good idea of where you stand.How Difficult Investigations Are Handled
Both FICO and VantageScore have a slightly different approach to the handling of hard inquiries in their models. When it comes to FICO, a period of 45 days containing multiple hard inquiries is considered to be equivalent to a single inquiry. If multiple hard inquiries take place within a 14-day window, VantageScore considers all of those inquiries to be equivalent to a single inquiry. This process, which is known as deduplication, can be helpful when you are comparing rates offered by multiple lenders, such as when you are shopping for a mortgage.The Scoring Scales
The range of possible FICO scores is from 300 to 850. The range of scores from 300 to 850 that is used by FICO was adopted by VantageScore 3.0. The following is a list of the credit levels that fall within that range: 781-850=Super Prime 661-780=Prime 601-660=Near Prime 500-600=Subprime 300-499=Deep Subprime In earlier iterations of VantageScore, the range of possible scores was 501 to 990. Both the VantageScore 1.0 model, which was introduced in March 2006, and the VantageScore 2.0 model, which was introduced in October 2010, assigned a letter grade to a credit score based on where it fell within the following ranges: A corresponds to the range 901-990, B to the range 801-900, C to the range 701-800, D to the range 601-700, F to the range 501-600, and H to high risk. When VantageScore version 4.0 came out in April 2017, the tiers and ranges remained the same as they were in version 3.0.Additional Information
According to FICO, its score does not take into account factors such as your race, colour, religion, national origin, sex, or marital status, all of which would be violations of federal law if they were taken into account. Additionally, it does not take into account your age, salary, occupation, or employment history. Additionally, it does not take into account your place of residence or the interest rate that is being charged to you on a credit card or other account. FICO also states that it does not factor in payments for child or family support that you are legally required to make, and it does not adjust your score based on inquiries into your credit filed by you, an employer, or a lender for the purpose of making a promotional offer or conducting a periodic review. These statements can be found on the company's website. It also does not take into account whether or not you are receiving assistance from a credit counsellor. According to the website for VantageScore, the company does not take into account a person's race, colour, religion, nationality, gender, marital status, age, salary, occupation, title, employer, employment history, total assets, or place of residence. Neither does it take into account the individual's marital status.The Crux of the Matter
The credit score that a potential lender will use to decide whether or not to approve your application for credit is the one that you should give the most weight to when making your decision. It is highly recommended that you check your FICO score because it is used by the majority of lenders. You should not, however, assume that to be the case. Always ensure that you inquire with your lender regarding the credit score that they will be checking.Questions That Are Typically Asked (FAQs)
Who prefers to use VantageScore as opposed to FICO?
You will discover that the majority of loan providers look at your FICO score. According to FICO, their scores are used by 90% of the top lenders to make decisions regarding credit approval, loan terms, and other factors. 8 VantageScore is an alternative to the more common FICO score that can be used by lenders and credit card companies. According to the findings of a study conducted in 2019, more than 2,000 different financial institutions accessed more than seven billion VantageScores each year.When compared to FICO, how accurate is VantageScore?
Both the VantageScore and the FICO score accurately measure a person's credit history; however, the calculations that they use are slightly different. Even though the two scores may arrive at different numbers for your credit score, this does not indicate that one score is more accurate than the other.