FICO vs. VantageScore: What's the Difference?
September 6, 2018
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Your credit score is an important measure of your overall credit health that can help — or stand in the way of — myriad financial goals. Good credit can make it easier to purchase a home or qualify for loans with the best rates and terms, for example, while bad credit can make qualifying for loans and other financial products next to impossible.
Still, your credit score isn’t necessarily easy to understand due to the many complex factors that go into how it’s determined. Add onto that fact that there are several credit scores out there, and it’s easy to get confused.
FICO Score versus VantageScore
With that in mind, it’s probably smart to focus on two of the main credit scoring models — FICO and VantageScore. Both scores work similar in the fact they are meant to portray your credit health in a numeric fashion, and both FICO and newer VantageScore models use the same 300 to 850-point range. Both credit scoring methods have also changed or evolved over the years, resulting in several different versions of each. However, your FICO score is inarguably more popular since it is used by 90% of top lenders.
But, several of the factors used to determine your credit score are weighted or considered differently under the FICO and VantageScore credit scoring models. Here’s how each of them looks at your data to determine your creditworthiness:
- 35% payment history
- 30% amounts owed
- 15% length of credit history
- 10% new credit
- 10% credit mix
- Extremely influential: payment history
- Highly influential: Age and type of credit
- Highly influential: % of credit limit used
- Moderately influential: Total balances and debt
- Less influential: Recent credit behavior and inquiries
- Less influential: Available credit
How FICO and VantageScore are Different
While it may seem that both scoring models work the same at first glance, there are a handful of differences that can make a difference in how your final credit score is determined with either method. A handful of differences that you may not know about include:
- When length of credit history is determined: When you’re first building credit, FICO requires you to have at least one account open for six months that has reported to the credit bureaus during that time to have a score. Without that milestone, you won’t show as having a FICO score at all. On the flip side, the VantageScore credit score can be reported with just one month’s history, making it a faster way to get a credit score when you’re first starting out.
- VantageScore places more emphasis on the age and type of credit: While your credit history length and credit mix only make up 15% and 10% of your FICO score respectively, VantageScore considers the age and type of credit you have as the second most important factor when determining your score.
- How late payments affect your score: While both FICO and VantageScore count late payments against you and consider your payment history the biggest determinant of your score, VantageScore gives more weight to late mortgage payments versus late payments on other types of debt.
- The way multiple inquiries are counted: Both VantageScore and FICO use a process called “deduplication” that bundles hard inquiries in situations where you apply for one loan but your application is sent to multiple lenders (e.g. auto loans through a dealership). With this method, both FICO and VantageScore consider these as one inquiry instead of multiples. However, FICO deduplicates similar inquiries that take place within 45 days while VantageScore only does so within a 14-day range.
How to Keep Your Credit Score High No Matter What
While it’s important to know there are multiple types of credit scores out there, there’s not a lot you can do to determine which credit score a lender might pull when you apply for new credit. When you can do, however, is take steps to keep your credit in the best shape possible.
Because all credit scores consider similar factors, the same steps apply to improve your credit no matter which score is chosen. To ensure your credit score improves or stays in an acceptable range, you should:
- Make all monthly payments early or on time. Avoid late payments since they can impact your credit score significantly.
- Keep your credit utilization low, preferably below 30%. Keeping your account balances low lets lenders know you aren’t desperate for new credit.
- Don’t open too many credit cards are once. While opening a new credit card occasionally won’t spoil your credit, try not to overdo it by opening too many new cards at once.
- Don’t close old accounts. Old accounts can help lengthen your credit history — even if you’re not necessarily using them.
How to Check Your Credit Score
If you’re curious where you stand with your credit score right now, your best bet is taking steps to see your credit score or an estimate of your credit score. Fortunately, this is easy to do with several methods.
There are several credit cards that offer a free FICO score on your monthly statement, for example. You can also get access to your VantageScore 3.0 for free via the web. All you have to do is head to this form and provide the following information:
- Your full name
- Your address
- Your date of birth
- Your email address
- The last four digits of your social security number
- Whether you have a checking or savings account
The Bottom Line
The differences between FICO scores and VantageScore may seem nuanced, and they are, but there are important distinctions to be aware of. Still, your strategy to maintain good credit is the same no matter what score lenders use.
Pay your bills on time, don’t go overboard with new credit, and don’t charge up huge balances you’ll struggle to repay. This is good advice for your credit, but it will also help you avoid financial trouble and long-term debt..