Fico score credit score difference
FICO Score vs. VantageScore – What’s the Difference?
These days, credit scores rule the universe of personal finance, especially when it comes to getting a new mortgage, an auto loan, a credit card, or even a new job. Credit scores are calculated based on an individual’s use of available credit in the past, and for better or worse, these scores dictate what creditors are willing to offer in the future. A credit score that has taken a few hits over the years could seriously impede one’s ability to move ahead in their financial life, so it is important to understand how credit scores work.
And, yes, you read that right. There are different types of credit scoring systems used by lenders to make decisions on applications for new credit, making the process of understanding scores more complex. The two most prominent are the Fair Isaac Corporation, or FICO score, and the VantageScore.
Here are the differences between the two.
Credit scoring models are the first differentiator between the two main scoring providers. FICO scores are based on the credit reports of millions of consumers collected by the three credit reporting agencies – Equifax, Experian, and TransUnion. By gathering data from three different agencies, FICO is able to establish a model for each based on the information that specific agency collects. Despite the three different models, Base FICO scores range from 300 up to 850, and consumers with higher scores are viewed as a lower risk to new creditors.
VantageScore works a little differently. Instead of establishing three separate scoring models based on the three credit reporting agencies, VantageScore is based on the collective data from Equifax, Experian, and TransUnion. A single scoring model is used for all three, and just like FICO, scores range from 300 to 850. VantageScore also includes a grading system in its model, giving individuals with high scores higher grades.
Requirements to have a Score
While credit scores have an impact on the financial well-being of nearly all consumers, not everyone has a credit score. It isn’t a metric assigned at birth, and establishing credit takes some time and, oddly enough, a credit account in the first place. FICO and VantageScore differ regarding the information each uses to create a credit score for individuals. FICO requires someone to have at least six months of credit history and at least one credit account reported in the last six months to calculate a credit score. VantageScore, on the other hand, only requires one month of credit history and a credit account reported within the last two years. Because VantageScore has less stringent requirements for its scoring system, it has the potential to generate credit scores and history for far more consumers than FICO.
Effects of Reporting
Both FICO and VantageScore view financial missteps by consumers as a negative when calculating credit scores, but the weight those missteps carry are different in each system. For instance, a missed or late payment on a credit card is viewed the same under the FICO scoring model. However, missing a mortgage payment and missing a credit card payment have different implications under VantageScore – the mortgage payment having a greater impact than the credit card. Additionally, even though inquiries to an individual’s credit report have a minimal impact on an overall score, it is important to note that inquiries are treated differently between the two systems. FICO will treat multiple inquiries for mortgage, auto, and student loans as a single entry when they are reported within a 45-day period. VantageScore, however, includes all types of credit applications in its multiple inquiries method, but only over a 14-day period.
Overall, the slight differences between FICO and VantageScore can lead to significantly varied credit scores for the same individual. To ensure you are on top of your financial picture, regardless of the type of scoring model used, take the time to check your credit history and score at least once throughout each year.