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VantageScore® and FICO® are both accurate credit scoring models with unique nuances. For example, FICO treats credit mix and age of credit as two separate categories, while VantageScore lumps them into one category (mix and age of credit).
Lenders can use your FICO score and VantageScore when deciding to approve or decline your loan applications. Learning how both models work can help you have a positive impact on your credit. We’ll compare and contrast FICO and VantageScore to help answer questions like “Why are my credit scores different?”
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Your FICO credit score is a credit scoring model created by the Fair Isaac Corporation (FICO) that is based on information in your credit reports with the three major credit bureaus—Equifax®, Experian® and TransUnion®. FICO score 8 is the most popular version of this model, and other versions can specifically weigh your habits with auto loans and credit cards.
Your VantageScore is also based on information in your credit reports with the three major credit bureaus, and it was created by those same credit bureaus as an alternative to the FICO scoring model. VantageScore 3.0 is the most commonly used version of this tool, which debuted in 2013. VantageScore 4.0 incorporates machine learning to analyze a person’s credit habits over time.
There are multiple reasons why your FICO score and VantageScore may differ, and it comes down to the way each model calculates scores. Here are several ways that these popular scoring models differ from each other.
The Fair Isaac Corporation was founded in 1956 (then called Fair, Isaac and Company), and they created the FICO score model in 1981. The corporation’s long-standing history is one of the reasons why so many lenders use its scoring models.
VantageScore Solutions, LLC, created the VantageScore model to gauge your creditworthiness using a different formula than FICO. This model was created in 2006, and many lenders have adopted it since.
FICO requires at least six months of credit activity to generate a credit score. Moreover, your credit report must display a tradeline (which refers to an item such as a credit card or line of credit) with at least six months of activity.
VantageScore simply asks that clients have at least one tradeline item on their credit reports. There’s also no minimum monthly requirement for that item.
When comparing your VantageScore vs. FICO score, knowing which factors affect each model is important.
FICO Score 8 consists of the following five factors:
VantageScore 3.0, on the other hand, looks at these six metrics:
Based on these factors, it’s easy to see why your FICO score and VantageScore can differ. Credit mix is scrutinized by VantageScore far more than FICO, which is why it can help to responsibly manage different credit accounts. FICO, on the other hand, weighs new credit activity more heavily—so pace yourself when applying for new credit.
Your FICO score and VantageScore are both important because they can help you get a sense of your current credit habits. However, auto loan lenders, commercial banks and landlords favor FICO. This means that your application for a new rental property will likely be approved or declined based on the strength of your FICO credit score.
There’s a lot of overlap between FICO and VantageScore, so most credit-building tips apply to both models. For example, payment history is the most important factor for both FICO and VantageScore, so making timely payments will positively impact both scores.
Several other ways to increase your credit scores include:
Responsible credit habits will build your credit no matter which model is being taken into account. Lexington Law Firm can help you better understand your current credit habits, help you manage account inquiries and address errors on your credit reports.
Learn more about our services and see if they will suit your needs.
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