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FICO Score Vs. VantageScore

by | Jul 21, 2023 | News

FICO score and VantageScore are two credit scoring systems that lenders and financial institutions use to evaluate an individual’s creditworthiness. These models aim to assign a numerical value representing a person’s credit risk, indicating how likely they are to responsibly repay their debts.

Here’s a brief comparison of FICO score and VantageScore:

1. FICO Score:
– The term “FICO” refers to Fair Isaac Corporation, the company behind this scoring model.
– Introduced in the 1980s, FICO has become one of the most popular credit scoring models worldwide, widely used by lenders in the United States and beyond.
– FICO scores typically range from 300 to 850, with higher scores indicating lower credit risk and greater creditworthiness.
– This scoring system considers information from major credit bureaus (Equifax, Experian and TransUnion) and takes into account factors such as payment history, outstanding balances, length of credit history, new accounts opened and types of credit utilized.

2. VantageScore:
– Developed collaboratively by Equifax, Experian and TransUnion in 2006 as a rival to FICO.
– The primary goal behind VantageScore was to establish a more consistent and standardized approach to credit scoring across all three major credit bureaus.
– VantageScore also follows a range of 300 to 850, similar to FICO scores in that aspect.
– Just like FICO, VantageScore takes into consideration factors like credit utilization, payment history, credit age, credit mix and new credit inquiries.

Here are the key differences between the two scoring models:

1. Calculation Method: Although both models consider similar factors, they may assign different weights to these factors in their algorithms. This means that for the same individual, the credit scores generated by FICO and VantageScore can vary.

2. Industry Adoption: Historically, lenders have predominantly used FICO scores, especially in the mortgage industry. However, VantageScore has been gaining popularity and is now being embraced by many lenders as well.

3. Scoring Range: Both models utilize a range of 300 to 850. However, there might be slight variations in the score ranges between them.

4. Credit Score Availability: Consumers have access to both FICO scores and VantageScores. However, different versions of each score may be offered by the credit bureaus.

It’s worth noting that various lenders and financial institutions may employ different credit scoring models when assessing loan applications. Consequently, this can result in variations in presented credit scores. Nevertheless, it’s important to understand that maintaining a good credit history and practicing responsible borrowing are crucial principles for both scoring models.