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When evaluating the major credit scoring models against each other, it seems to be a case of “out with the old, in with the new.” As FICO has been top dog in the credit scoring industry, VantageScore is edging its way in with small differences that lends itself to greater flexibility.

While lending companies everywhere use a variety of scoring methods, both proprietary and the two major methods, both FICO and VantageScore are the two primary go-to models consumers can use to get a gauge of what lenders are seeing.

Their newest versions, FICO 8 and VantageScore 3.0, are showing increasing consideration for consumer circumstances over older, more stringent versions. FICO offers a basic report which the consumer can see, but also provides at least 50 different types of credit scores that it derives, depending on the requirements of potential lenders.

Despite VantageScore and other models creeping their way in, FICO has been the forerunner in the credit rating industry since it invented the scoring system. FICO, the Fair, Isaac, and Company have been around since its founding in 1956 in San Jose, California. It quickly gained traction after pitching a number of lenders it’s scoring algorithm to help companies determine a potential borrower’s creditworthiness. In 1986, the company went public and has been offering general-purpose and more tailored credit scores ever since.

In 2006, VantageScore hit the scene as a result of a collaboration between the three major credit bureaus: Experian, TransUnion, and Equifax in an effort to provide a competing scoring system against FICO. VantageScore is run by VantageScore Solutions, LLC, and features a very similar scoring system as FICO.


Similarities Between FICO and VantageScore

VantageScore originally began calculating scores based on a 501 to 990 range, assigning a letter grade to subranges between those two numbers. But, in an effort to be more consistent with what consumers were used to seeing, VantageScore’s system changed to reflect the same range as FICO. Both firms assign scores between 300 and 850. Scores up to 689 translates into a bad credit rating. 630 to 689 equals fair or “average” credit. 690 to 719 means you have good credit, and anything 720 and up is excellent.


Hard Inquiries

FICO and VantageScore also both penalize consumers for too many hard credit inquiries in a short period of time. Hard credit inquiries are any checks on your credit score that you’ve initiated, i.e. when applying for a credit card or personal loan. They ignore soft inquiries – any inquiries made by potential lenders that borrowers haven’t initiated – but will lower a score if a hard inquiry for the same type of credit is made in a narrow window of time.

They both deduplicate, however, which means they won’t penalize you for a shotgun blast of credit inquiries by different lenders for a single credit line. This is especially relevant when a car dealership, for example, sends auto loan applications to a large selection of lenders on the car buyers’ behalf.


Debt Forgiveness

Newer development with both FICO and VantageScore is their willingness to ignore debt that’s been paid off. The record of the initial bad debt is still on the credit report, but both scoring models no longer include it in their scoring evaluations. This new approach to debt repayment gives consumers big incentives to pay the debt off.


Differences Between FICO and VantageScore

Essentially, differences between FICO and VantageScore are minimal enough that you could order a report in either format and be confident in getting very similar appearing ratings, with only a minor difference in points. But there are some subtle differences between the two systems.


Credit History

The key advantage VantageScore has over FICO is that it allows the consumer to establish a credit history much sooner than FICO. This is beneficial for those consumers needing or hoping to fix their credit score quickly. For those credit lenders who are eager to have some indications of an individual’s creditworthiness, VantageScore delivers on any consumer that’s been active for very little time. FICO requires six months from the time of first credit entry before it will generate a report on a consumer, whereas VantageScore only requires one month.


Minimum Debt

On the other hand, FICO is more tolerant of delinquent accounts, incorporating only outstanding debt that’s over $100 in value into its credit score calculation. VantageScore gives you no break and includes all bad debt into its scoring model.


Debt Weighing

VantageScore is also more strict than FICO in terms of late payments. It takes all forms of late payment into consideration with different degrees of importance when calculating a credit score. A late mortgage payment is weighted more heavily than a credit card payment or an outstanding medical balance. FICO weighs all types of outstanding debt over $100 equally. There’s no difference in weight between mortgages, credit card debt, or medical bills.

The advantage for consumers with this schema is found in the leniency over medical debt. With so many changes in medical insurance terms in the past ten years, increasing medical costs have fallen on consumers’ shoulders, and an uptick in billing mistakes have also resulted in billing disputes and unpaid balances.

Scoring Models

Another difference that may be less noticeable for consumers is the way both FICO and VantageScore’s scoring models are set up. FICO collects consumer data from each of the three credit bureaus individually. They use a customized method for each bureau since the bureaus do not communicate their data to each other. VantageScore uses the same algorithm to compile all data from the three bureaus at once.

Crowded Business

Although VantageScore and FICO are the two primary sources for consumers to obtain a score of their creditworthiness, they are only two of nearly a thousand different scoring methods on the market.

The problem is, consumers will never see the scores generated by all of the other methods. The vast majority of these are all proprietary in-house scoring algorithms used by major lenders. The good news is, the score that the vast majority of these proprietary methods will generate is going to be similar enough to the VantageScore or FICO score that you see. So, you’ll have ample peace of mind knowing where you stand based on receipt of a FICO or VantageScore rating.

Although both FICO and VantageScore have unique characteristics that set them apart from each other, you can rely on either scoring model to get an accurate assessment of where you stand in terms of creditworthiness.