The underlying similarities between these credit rating systems are for lenders to be able to avoid risky borrowers. Until 2006, FICO which was formerly Fair Isaac Corp never had any close competition since coming into existence in the 1980s. As a point of entry, you already know what credit scores are and how important it is to your life. For the purpose of understanding the two, the following are the ways both are calculated.
However, you are probably in the dark as to which you should focus on and the differences between these two. The eight version of FICO which is the most used by lender considers 5 criteria in computing your credit scores;
- Payment history
- Total amount of credit
- Length of credit history
- New credit
- Account mix
On the other hand, since it 11 years of existence, Vantage score adopts its own criteria in determining credit worthiness;
- Payment history
- Percentage of credit used
- Age and type of credit
- Available credit
- Credit behavior
- Total balance and credit
Differences Between Vantage and FICO Scores.
These are the two giants when credit rating is concerned in United states. Understanding the key differences between these scoring systems will help to maintain a positive credit lifestyle regardless of which is considered;
- Different Scoring Models
FICO scores credit using a 300 to 850 range. This is reliant on credit reports which are retrieved separately from the three CRA’s; Experian, TransUnion, and Equinox. Each CRA has a separate model built for it by FICO. Vantage, on the other hand, uses a model which obtains a credit report from the three CRA’s jointly and has a single model for calculating the scores. Vantage score range from 501 to 990.
- Late Payments Are Treated Differently
Late payments are an important aspect of both FICO an vantage scores. They are considered based on the severity, recency, and frequency. The difference lies in the ways late payment is treated by the two. While FICO considers all late payment, in the same manner, Vantage sees late mortgage payment as more severe. Simply put, a late payment on the mortgage will have less impact on your FICO score than your Vantage score.
- Different Requirements On Credit Scoring
Minor differences are between the credit scoring requirements of the scoring systems. The length of credit history on the FICO score is around 6 months, while Vantage requires just a month of credit to compute the credit score. With this, Vantage is able to score more creditors than FICO. Fico scores are readily available on the CRA’s website but Vantage is not that accessible.
- Credit Inquiries
There’s a minimal impact by credit enquiries on both FICO and Vantage scores. The time span of credit enquiries on FICO is set at 45 days while Vantage makes use of a 14 days span for scoring. While Vantage applies this to all credit, FICO applies it to only student loans, auto loans, and mortgage.
- Low Balance Collections.
In relation to third party collection agency items on credit reports, all collection below $100 is ignored by FICO as it treats above $100 as the same. On the other hand, Vantage is based on $250 or less.
Creditors use your credit scores to determine your ability and capacity to pay back loans and credit. This numbers might look simple to you, but they are the keys to car insurance, loan interest rate, and even employability.
Vantage and FICO have risen to prominence in recent years, as more attention is paid to these two than any other. Both are reputed to give you a clear picture of your creditworthiness.