VantageScore Vs. FICO Score: All You Need to Know

Vantage Score

While much has been debated in various credit repair reviews regarding the importance of VantageScore over FICO Score, the former is making its presence felt in the FICO dominated credit score market for some time now. In 2014, VantageScore Solutions reported that approximately 1 billion of its scores were used (a 600 percent increase) and approximately 3 billion scores were requested by the lenders, for the purpose of modeling and testing. There was also a 24 percent increase in the number of banks using the VantageScore. Considering the turbulent rate at which the credit score system is making a shift, it is essential for consumers to understand what VantageScore is, and how it is different from the popular FICO credit score. Let’s begin.

What is VantageScore?

Most creditors focus on the three-digit FICO score to decide whether to issue a new credit card to applicants (mortgage, credit cards, etc.), and decide the interest rates, if their score qualifies. While FICO credit scores remain the standard in more than 90 percent of the lending decisions by top 100 largest U.S. financial institutions; in 2006, the three credit bureaus – Equifax, Experian and TransUnion – introduced a new credit score system VantageScore. The credit rating is still three digit numbers based in the new scoring system but there are a number of factors that differentiate VantageScore from FICO score.

What Differentiates VantageScore from FICO Score?

Let’s try to understand how VantageScore might completely change the way a creditor looks at your credit:

Five Vs. Six Rating Variables

While FICO score uses five credit rating variables, VantageScore is calculated on the basis of 6 rating variables.
FICO score variables

  • Payment history – 35 percent
  • Amount of debt – 30 percent
  • Length of credit history – 15 percent
  • Types of credits – 10 percent
  • Credit inquiries – 10 percent

VantageScore variables include:

  • Payment history – 32 percent
  • Credit utilization – 23 percent
  • Total debt including loans – 15 percent
  • Depth of credit – 13 percent
  • Recent credit – 10 percent
  • Available credit – 7 percent

Credit Score Range
The credit score range in FICO is from 300-850 while the range in VantageScore is between 501-900. Borrowers with high credit scores are considered less risky by both the credit scoring systems but VantageScore also gives a letter grade to different range of credit scores.

  • 901-990 – A (Super Prime)
  • 801-900 – B (Prime Plus)
  • 701-800 – C (Prime)
  • 601-700 – D (Non-prime)
  • 501-600 – F (High Risk)

Late Payments
FICO and VantageScore regard credit accounts with a history of late payments in similar ways; both FICO and VantageScore take into account the recency, frequency and severity of late payments while calculating your credit score. The major difference between the scoring models is that FICO treats all the late payments in the same way but VantageScore has higher penalty for late mortgage payments than any other type of credits. If an individual fails to make a mortgage payment on time, it will impact the VantageScore more than the FICO Score.

Difference in the Inquiry Counts
Both scoring models treat the multiple inquiries posted within a particular time period as a single inquiry, but the duplication method they use is different. FICO has a 45-days span to treat multiple inquiries, while VantageScore uses 14 days for the same. FICO applies this treatment to mortgage, student and auto loans, while VantageScore follows it for all types of credits including auto, cards etc. It is true that inquiries don’t have a major impact on your credit score but if you are just a couple of points short to qualify for a mortgage, inquiries can make or break your financial future.

The Downside of VantageScore

The letter grades in VantageScore cause a lot of confusion among consumers. FICO scores don’t have grading system and rely on numbers, thus, a difference of only a few points may have a great impact on the interest rates a consumer receives from the lender. As a result of the different letter grades in VantageScore, a consumer is most likely to receive better interest rates only when its score rises by 100 points. A consumer with a credit score of 701 and a consumer with a credit score of 799 will receive the same grade.

VantageScore and FICO Score rating systems have their own advantages and disadvantages, when it comes to measuring the creditworthiness of an individual. While FICO gives an annual free copy of the credit report, VantageScore is available free of cost, with no conditions or limitations.

Irrespective of the advantages or disadvantages of the scoring systems, it is essential for individuals to make all the payments on time, keep their balances low and apply for a new credit only when it is necessary. When you are aware of the subtleties of the credit scoring system, you can work towards improving your credit report. If you need expert advice on the subject, feel free to contact us for a free consultation.