FICO vs. VantageScore: 5 differences you should understand
Show Caption Hide Caption Your credit score is not affected by these things
A fiscal services party laid out some of the myths consumers face when dealing with their credit score. Veuer ‘s Nick Cardona has the narrative. Buzz60 When you think credit rating grudge, you probably think FICO. Since the Fair Isaac Corporation introduced its FICO seduce system in 1989, “ What is my FICO grade ? ” has become a common question. FICO scores have burrowed their way into all kinds of lending decisions, most notably mortgages, credit cards, and rentals. But over the last ten or so, FICO ’ s market dominance has been challenged by a newcomer called VantageScore. As the solution of a collaboration between the three major credit report agencies ( CRAs ) — Experian, Equifax, and TransUnion — VantageScore uses like scoring methods to FICO but with slightly different results. So what are the differences, and more importantly, do they very matter to you, the consumer ? The inadequate answer : normally no. But you might want to look at different scores for different needs or goals. In this article, we ’ ll cover the five chief differences between FICO and VantageScore and tell you which one to watch .
1. Difference in scoring models
FICO and VantageScore aren ’ t the only score models on the marketplace. Lenders use a multitude of scoring methods to determine your creditworthiness and make fiscal decisions. But despite the numerous options, FICO and VantageScore are likely the lone scores you ’ ll ever personally see. How do FICO and VantageScore rate you ? Both use the same basic criteria :
- Payment history
- Length of credit
- Types of credit
- Credit usage
- Recent inquiries
Although both FICO and VantageScore consider much of the same information, they gather their data in different ways. FICO bases its scoring mannequin on credit reports from millions of consumers at once. They gather these reports from the three major credit chest of drawers and analyze the reports ’ anonymous consumer data to generate an accurate score exemplar. alternatively, VantageScore uses a unite set of consumer credit files, besides obtained from those same three credit chest of drawers, to come up with a individual formula. Both FICO and VantageScore write out scores ranging from 300 to 850. In the past, VantageScore has used a range of 501 to 990, but the range was adjusted when VantageScore 3.0 was issued in 2013. VantageScore ’ mho numeral rankings now match FICO ’ mho, which makes it easier for consumers and lenders to implement the VantageScore model — plus, it ’ sulfur less confusing for consumers who check both their FICO score and VantageScore. More: Tompor : Expect higher rates on credit rating cards, loans due to Fed More: That new storehouse card could torpedo your recognition score More: How to actually keep your new year ’ s debt resolutions
2. Variance in scoring requirements
If you don ’ t have a long history of recognition, VantageScore is the score you want to monitor. Before it ’ s able to establish your credit score, FICO requires at least six months of credit history and at least one report reported to a CRA within the survive six months. VantageScore only requires one month of history and one score reported within the by two years.
Because VantageScore allows a shorter citation history and a long period for report accounts, it ’ s able to issue credit rating ratings to millions of consumers who wouldn ’ t qualify for FICO scores. Considering how everyone from employers to landlords wants to see your credit rating score these days, if you ’ re new to credit rating or seaport ’ t been using it recently, VantageScore might be able to prove your trustworthiness before FICO has enough data to issue a rat . How significant is your credit score to buy a home ? Your credit grudge is one of the few things that tells banks, yes, they can trust you with their money. Video provided by Newsy Newslook
3. Significance of late payments
A history of late payments will impact both your FICO score and your VantageScore. Both models consider these factors :
- How recently the last late payment occurred
- How many of your accounts have had late payments
- How many payments you’ve missed on an account
however, while FICO treats all recently payments the lapp, VantageScore judges them differently — it penalizes belated mortgage payments more harshly than early types of credit rating. If you ’ ve had late payments on your credit rating cards, they will have about the same impact on both your FICO and your VantageScore. But if you ’ ve had deep payments on your mortgage, you might find you have a higher FICO score than VantageScore .
4. Impact of credit inquiries
You ’ ve credibly heard you shouldn ’ thyroxine open excessively many credit cards in a short circuit period of time. One rationality for this is every time you apply for a accredit circuit board, the lender does a “ hard question ” to check your creditworthiness. VantageScore and FICO both punish consumers who have multiple heavily inquiries in a short-circuit period of time, and they both do “ deduplication. ” Deduplication is important for things comparable car loans, where your application may be sent to multiple lenders, thereby resulting in multiple inquiries. Both FICO and VantageScore don ’ triiodothyronine reckon each of these inquiries individually — they deduplicate them, or consider them one question. however, the timespan they use for deduplication differs. FICO uses a 45-day couple to deduplicate your credit inquiries. VantageScore limits its concenter to entirely a 14-day range. VantageScore besides looks at multiple hard inquiries for all types of recognition, including credit cards. FICO considers lone mortgages, car loans, and scholar loans. Inquiries aren ’ t your biggest concern when it comes to your credit score, but they do have an impact. If you want to buy a house or a car, restrict hard inquiries deoxyadenosine monophosphate much as potential to avoid lowering your credit score .
5. Influence of low-balance collections
VantageScore and FICO both have penalties for accounts sent to solicitation agencies. however, FICO might give you a bite more of a break when it comes to low-amount collection accounts. FICO ignores all collections where the original libra was under $ 100. It besides doesn ’ metric ton count collection accounts you ’ ve paid off. VantageScore, on the other hand, ignores only paid collection accounts, careless of the original poise measure . Worried about Equifax ? Freeze your recognition ! If you ‘re concerned your personal information might have been exposed by the Equifax breach, you can take steps to freeze your credit. USA nowadays
Keep your credit high
regardless of the differences between FICO and VantageScore, the essential advice for keeping your credit score high remains the like :
- Avoid late payments. Pay your bills, and pay them on time.
- Keep your credit balances low. Don’t max out your credit cards, and try to keep your cumulative balance to less than 30% — the lower the better.
- Apply for new credit only when you have to. Don’t open a bunch of new cards in a short period of time, and don’t close old accounts without good reason.
Check your VantageScore monthly
You can get a rid VantageScore 3.0 credit score, updated monthly, from Credit.com. You can besides see how your score compares to others and get a custom carry through plan for your credit. Remember, every point counts when it comes to getting the best interest rates and lending terms. Barry Paperno provides a perspective on credit and personal finance that comes from more than 25 years serving the credit industry, representing FICO, Experian, Bank of America, and others. Credit.com is a USA TODAY message partner offering personal finance news program and comment. Its capacity is produced independently of USA TODAY .