FICO vs Vantage Scores: A Detailed Analysis of Credit Score Variations
The difference between FICO and Vantage Scores is significant, with FICO being the most widely recognized and utilized credit score system among lenders. The Vantage Score brand has an advantage in terms of cost, being free, but has garnered less attention from consumers. This article delves into the key similarities and differences between FICO Scores and Vantage Scores.
Founders and Purpose of FICO and Vantage Scores
Both FICO Scores and Vantage Scores share the common purpose of aiding lenders in evaluating the credit risk of prospective borrowers. Yet, they have distinct origins and characteristics. FICO scores are generated by the publicly traded FICO Fair Isaac Corporation, established in 1956. Contrarily, Vantage Scores were developed in 2006 by Experian, TransUnion, and Equifax, the three major credit bureaus.
Versions and Scoring Ranges
FICO offers various generic and industry-specific score types, with FICO 8 being the most commonly utilized. Although FICO 9 and later versions have been developed, FICO 8 remains the most widely adopted. Vantage Scores come in versions 3.0 and 4.0, the current most advanced iterations. Both FICO scores and newer versions of Vantage Scores range from 300 to 850. However, older Vantage Score models ranged from 501 to 990.
Calculation and Evaluation Metrics
Credit scores are calculated based on similar factors such as payment history, credit utilization ratio, and credit mix. However, the weight of these factors can vary between FICO and Vantage Score models. A good FICO score range is typically 670 to 850, while a Vantage Score falls in the range of 66 to 990. What constitutes a 'good score' can differ between the two brands, and it's essential for consumers to understand these differences.
Minimum Scoring Criteria and Lender Preferences
More consumers are likely to receive a Vantage Score due to fewer minimum scoring criteria required. FICO requires consumers to have at least one tradeline that is at least six months old and another with activity within the last six months. Conversely, Vantage Score only requires one tradeline with no age requirement. This flexibility often leads to a higher number of consumers qualifying for a Vantage Score, thereby making it more accessible.
While FICO is the most common credit score used in lending decisions, with approximately 90% of lenders relying on it, FICO is the exclusive credit assessment tool approved by government-sponsored lenders such as Fannie Mae and Freddie Mac. This regulatory approval might influence lenders' preference for FICO Scores, even though many still use both FICO and Vantage Scores for different purposes.
Understanding the differences between FICO and Vantage Scores can empower consumers to make informed decisions regarding their credit ratings and financial health. Lenders and consumers alike should familiarize themselves with these scoring systems to optimize credit opportunities.