How Does VantageScore Differ From FICO Score?

How does VantageScore Differ From FICO Score
Fiona Staff3/27/2020

Since its introduction in 1989, the FICO Score has reigned supreme as the most widely used credit scoring model in the US. The formula has gone through multiple iterations since, but if a consumer is applying for a loan or credit card, the financial institution on the other end is almost certainly using the applicant’s FICO score to help determine their creditworthiness.

Since 2006, however, there has been a new kid on the credit score block. VantageScore may not be as big a household name as FICO Score, but the newer model has grown in popularity thanks to its progressive approach to assessing a person’s financial behavior. As a result, lenders are also using VantageScore when assessing applicants for financial services, like a personal loan

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A credit score, of course, is a tool used to determine a consumer’s creditworthiness, as well as their ability to make other timely payments (e.g., rent or medical bills). The score is based on personal financial data collected by the three major credit bureaus – Experian, Equifax, and TransUnion – to create a credit report. The information gathered in the report is then inputted into a specific (link: text: scoring model (e.g., FICO or VantageScore) to determine the borrower’s credit score.

FICO vs VantageScore

As previously mentioned, the FICO scoring model has gone through a number of alterations over the years, as it attempts to more accurately capture a consumer’s creditworthiness. FICO is used by 90% of lenders, making it both the older and more widespread of the two models.

VantageScore is a joint venture between the three previously mentioned credit bureaus: Experian, Equifax, and TransUnion. The model was conceived to expand access to credit scoring for a wider majority of Americans. VantageScore set out to do so by lowering its minimum scoring requirement. Whereas FICO requires consumers to have an active account in the past six months, VantageScore only requires one active account in a person’s credit report, regardless of length.

Another contrast between VantageScore and FICO is how their models are used among Experian, Equifax, and TransUnion. Since the three credit bureaus created VantageScore, there is one standalone model used by all of them. With FICO, on the other hand, each agency has its own unique FICO score model to work with. 

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With regard to its most recent model, VantageScore 4.0 was released in 2017. While VantageScore 4.0 uses the same credit score range as FICO, as well as the same (link: /learn/about-creditcards/how-is-a-credit-score-calculated text: factors in its calculation), it differs in its approach to weighing and viewing the factors. For example, when it comes to how much revolving credit a consumer is spending (i.e., their (link: /learn/about-creditcards/the-importance-of-keeping-a-low-credit-utilization-ratio text: credit utilization ratio)), VantageScore focuses more on trended utilization, which looks at whether a consumer is paying the minimum or full statement balance on their credit card over a period of 24 months. (link: /learn/about-loans/how-trended-data-is-evolving-the-credit-score text: Trended data) like this can provide a better outlook of how a consumer’s credit behavior is changing or staying the same, as opposed to a snapshot that only tells one story.

Bottom Line

A strong credit score can be the difference between getting approved for a loan and being turned down. With its modern and dynamic scoring model, VantageScore is changing the way lenders view applicants. However, FICO is not far behind, as its latest model is also incorporating trended data to provide a better picture of consumer financial behavior. No matter which model a lender uses, it’s important to boost your credit score with good financial habits. Doing so can lead to finding a personal loan offer that best suits your needs.

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