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FICO versus VantageScore

When it comes to credit scores, there are two scoring models to be familiar with. You’ve probably heard of FICO and VantageScore and if you want to improve your scores, you need to understand what these are and how they determine scores. Let’s take a look. 

Fair Isaac Corporation, or FICO, leads the scoring industry in the United States but VantageScore is close behind. FICO was first available for lenders in 1989, so it’s been around the longest. Equifax, TransUnion, and Experian developed and introduced VantageScore in 2006. 

Both companies create software that determines a person’s credit score by collecting and analyzing the financial data on their credit report. They also generate consumer risk scores. These scores predict the odds of a person getting at least three months behind on a bill over the next couple of years. Banks and other lenders use this information to determine a person’s financial situation when considering them for a line of credit. 

Over the years, both FICO and VantageScore have evolved, so multiple versions of each are available. They’re both similar in some ways but the criteria they use to determine the scores vary. For this reason, your score may vary as well. 

For example, FICO uses five categories to determine your score. Each one of them represents a certain percentage of your overall score. The percentage determines the impact it has on your score.

The categories and percentages are as follows:

  1. The type of credit you have makes up ten percent
  2. New credit makes up ten percent
  3. The length of time your credit history covers makes up fifteen percent
  4. The amount of credit you owe makes up thirty percent
  5. Your payment history makes up thirty-five percent

VantageScore uses six different categories to determine your score. Some have a high impact while others don’t make a lot of difference. 

The six categories and the impact they make are as follows:

  1. Recent inquiries and credit behavior have a low impact
  2. The amount of credit you have available has a low impact
  3. The total amount of debt you owe has a moderate impact
  4. The type of credit you have along with your age has a high impact
  5. The percentage of credit you’re using has a high impact 
  6. Payment history has an extremely high impact 

Here are some other ways that FICO and VantageScore are different:

  • To generate a credit score using your credit history, FICO requires you to have a minimum of one account open for at least six months. VantageScore will generate your credit score using just one month’s worth of credit history.
  • To determine your credit history FICO also requires one of your accounts to send a report to the credit bureaus during the last six months. VantageScore will generate your credit history if one of your accounts reported to the bureaus during the last 24 months. This is great for people that don’t use credit frequently or that is new to building their credit history.
  • Hard inquires make a big impact on your credit. FICO will count all credit inquires done during the last 45 days as one single inquiry if they’re the same type of credit line. VantageScore counts all inquiries done within a 14-day period as one single inquiry no matter what type of credit you applied for. 
  • FICO credit scoring software uses the data they collect during the time the scores are being generated. VantageScore’s software uses the information that shows up in your credit history over the last two years.

Understanding the differences in the criteria that both FICO and VantageScore use when determining your credit score will help you understand why they vary. If you have a long credit history, FICO may offer the best score. However, if you don’t have a credit score due to having little or no credit history, then a secure credit card design to build credit may be the solution.

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