If you make use of any credit monitoring tools, you may have noticed that FICO isn’t the only scoring model in the game anymore. Worse, you may even have experienced a shock if your credit score appeared to change after your monitoring tool switched models.
Yes, it’s true. FICO has a competitor in the (relatively) new scoring model from VantageScore. Because VantageScore usually sells its credit reports to businesses more cheaply than FICO does, chances are your credit monitoring tool has already switched to it, or will soon.
But what is VantageScore, how is it different from a FICO score, and what impact does it have on your credit options?
The History of FICO and VantageScore
While many Americans use “FICO” to mean “credit rating” the way we use “Kleenex” to mean facial tissue, that’s a mistake for the same reason. FICO is simply the brand name for the credit scoring model first developed by the Fair Isaac Corporation (FICO) in 1958.
FICO was a niche business for nearly 30 years, but after releasing its first scoring model intended for general use in 1989, it quickly established a near-monopoly over modeling personal credit scores. Indeed, to this day, it remains the only scoring model approved by the Federal government for evaluating mortgage applicants.
FICO charges each of the three major credit bureaus to make use of its scoring algorithms, and in response, Experian, TransUnion and Equifax struck a deal in the mid-2000s to collaborate on the development of their own, cheaper scoring model. The result: The first official release of the new VantageScore credit scoring model in 2006.
Both primary scoring models undergo changes every few years, and as of 2016, we’re on version 3.0 of VantageScore, and version 8 (soon to be 9) of FICO.
It’s estimated that FICO remains the credit scoring model of choice for more than 90 percent of all credit approvals, including loans, credit cards and mortgages. But VantageScore’s market share increases a bit every year, and in the meantime, it’s made major inroads with businesses that want to pull your credit score without actually making a credit decision, like credit monitoring services.
So, for the first time in the modern history of U.S. credit scoring, you’re very likely to deal with two entirely separate credit scoring systems when viewing your own credit score versus applying for credit or a loan.
Understanding the Differences Between FICO and VantageScore
As of 2013, VantageScore uses the same 300 to 850 scoring range that FICO uses, but the way your score is calculated between the two models has a few key differences.
Establishing Credit History
While FICO requires you to have qualifying credit activity in the last six months to calculate your credit score, VantageScore considers the past 24 months. This means if you’re a new entrant to the credit market and don’t have an established credit history, VantageScore is more likely to provide you with a credit score than FICO.
Factors Influencing Your Credit Score
While neither company releases detailed information about how it calculates its primary scoring models, FICO has long made rough guidelines publicly available.
Your FICO score is broken down according to these approximate guidelines:
- 35 percent is determined by your history of on-time or late payments.
- 30 percent is determined by the total amount of debt you owe.
- 15 percent is determined by the length of your credit history, that is, the age of your oldest on-record account.
- 10 percent is determined by the number of recent credit lines or loans you’ve established.
- 10 percent is determined by the type of credit you use, for example, credit cards, mortgages and so on.
VantageScore has yet to provide the public with a similar percentage breakdown, but it has issued general guidelines on what impact different types of information have on your credit score:
- Highest impact: Your history of on-time or late payments.
- High impact: The length of your credit history (oldest account age), the type of credit (cards, mortgages and so on) and the percentage of your credit that’s used (your credit utilization).
- Moderate impact: The total amount of your current debt.
- Least impact: Your total available credit and recent credit inquiries or activity.
Frequently Asked Questions About FICO and VantageScore
Can you choose which score is used for a credit decision?
No. Any business you authorize to check your credit score or pull your full report decides on its own which agency and scoring model to use.
How can you view your FICO and VantageScore credit scores?
An increasing number of credit monitoring services now use VantageScore, but there’s usually no way to specifically order one type of score over another. You need to contact or review the business you plan to work with to find out if it offers both scores or only one of the two.
How do you know which score is being used at any given time?
Most businesses should make it clear on your paperwork (credit report, application decision and so on) which scoring model is used, but if you’re ever in doubt, don’t hesitate to contact the business directly for clarification.