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FICO vs VantageScore: What You Need To Know About Credit Scores


Your credit score is used by many lenders in their approval process to determine if the person is likely to pay back the line of credit. The most popular credit scoring model is provided by FICO, Fair Isaac Corporation, and is used by about 90% of lenders. The second most common credit scoring model is by VantageScore. It’s important to know which credit scoring model is used by a lender when seeking a new line of credit as these models calculate credit scores differently.


FICO Credit Models


The first FICO credit scoring model was introduced to lenders in 1989. Every few years FICO changes the way they calculate credit scores as they come out with new models. They recently announced two new scoring models, the FICO 10 and FICO 10 T, which will be adopted by lenders in the next couple of years. Learn more about the new FICO credit score changes and how to be prepared.


What didn’t change with these new credit scores is the 5 main factors used to determine FICO credit scores:

  1. Payment History - 35%

  2. Credit Utilization - 30%

  3. Length of Credit History - 15%

  4. New Credit - 10%

  5. Credit Mix - 10%


Read more about the factors that contribute to your FICO credit scores and some tips to improve your score.


FICO won’t generate a credit score for you unless you meet the following requirements:

  • One or more credit accounts open for at least 6 months

  • One or more credit accounts reported to the credit bureaus within the past 6 months


This means that if you recently opened a credit account you may not have a FICO credit score yet.


VantageScore Credit Models


The VantageScore credit scoring model was introduced in 2006 by the 3 credit bureaus, Equifax, Experian and TransUnion, to compete with FICO and provide a “more predictive scoring model that is easy to understand and apply.”


The breakdown of the factors that determine your VantageScore credit score is less clear than that of FICO:

  1. Payment History - extremely influential

  2. Age and Type of Credit - highly influential

  3. Credit Utilization - highly influential

  4. Total Balances and Debt - moderately influential

  5. Recent Credit Behavior and Inquiries - less influential

  6. Available Credit - less influential


If you just recently started using credit, you may not have a FICO credit score but you could have a VantageScore credit score. This is because VantageScore can use one month of credit history and data from only one account reported in the last year.


Because FICO and VantageScore use a different calculation, your credit scores from them may vary. FICO claims that other scores could differ from theirs by up to 100 points. Personally, our team has seen a difference of up to 40 points between FICO and VantageScore.


Credit Ratings


Credit scores from both FICO and VantageScore range from 300 to 800 and determine if you’ll be approved for a new line of credit as well as the interest rate you’ll pay. Each lender has their own ranges that they use to determine credit worthiness, but in general here’s the breakdown of credit ratings:

  • Bad: 300-629, it can be difficult to get a line of credit

  • Fair: 630-689, limited options for new credit and a high interest rate

  • Good: 690-719, more credit options and lower interest rates

  • Excellent: 720-850, lowest interest rates offered, best credit options


Where To Get Your Credit Scores


FICO


You can get your FICO credit scores from myFICO. It offers a detailed breakdown of the factors that contribute to your credit score as well as a credit score simulator to see how different financial decisions may affect your credit score. You will get access to monthly Experian credit reports and they will alert you to any changes in your credit report. Check out myFICO.





VantageScore


You can get your VantageScore credit scores from Credit Karma. Credit Karma also provides insights into your credit scores and how you can improve them as well as credit monitoring so you will receive alerts when there is a change to your credit reports. They also provide personalized recommendations for credit cards and loans depending on your credit score. Check out Credit Karma.


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