FICO vs VantageScore: What is a Credit Score?

Knowing your credit score isn’t a required part of being an adult.
But it sure helps.
Having this financial information in your hands before walking into a bank or filling out a loan application online can help save you a lot of hassle.
Instead of being quickly turned down for a loan or offered a high interest rate because you have a low score, you can work on fixing it first. Why waste your time applying for loans you won’t get?
Looking up your credit score is just the start. After doing that you can learn how a score is calculated and what you can do to improve yours.

What is a Credit Score?

A credit score is a number that gives creditors a quick glance at your credit history to help determine how big of a risk you are in being given a loan.
Scores range from 300 to 850 to measure creditworthiness. The higher the number, the better for you as a borrower.
A good score will make it easier to be approved for new credit accounts, higher loan or credit limits, and lower interest rates.
The FICO Score and VantageScore are the most common credit scores. Each has variables that affect the number given to a consumer, and those variables can be improved in different ways to raise a score.
When you apply for a new loan or credit card, the lender will ask one of the three major credit bureaus — Experian, Equifax and TransUnion — for your credit report. The data is run through an algorithm to determine your score, either a FICO or VantageScore. This can leave you with a different FICO or VantageScore from each of the three credit bureaus.

What’s in a FICO Score?

This is the most common credit score, used by more than 90% of the top lenders in the country.
It was created by the Fair Isaac Corporation. In 1995 Fannie Mae and Freddie Mac, the biggest secondary mortgage companies in the U.S., started using FICO for loan applicants.
The version of the FICO Score that’s used the most is FICO8. It was introduced in 2009, though FICO9 was released in 2019.
The FICO8 score ranges are:
  • 300-579: Very poor credit
  • 580-669: Fair credit
  • 670-739: Good credit
  • 740-799: Very good credit
  • 800-850: Exceptional credit
How it calculates scores is kept private, but the factors and weight given to each are:
  • Payment history: 35%
  • Amounts owed: 30%
  • Length of credit history: 15%
  • New credit: 10%
  • Credit mix: 10%
We’ll get into detail later how to do things that count the most toward improving a credit score, so don’t get discouraged if you’ve made late payments from time to time or only have one type of credit.

What’s in a VantageScore?

This major credit scoring model was created by the credit bureaus in 2006 as an alternative to FICO. Multiple versions exist, with VantageScore 3.0 being the latest that’s used by lenders and credit card issuers across the country.
A big advantage of VantageScore is that even with a short credit history of as little as one month you can get a score and have access to credit. FICO requires six months of data.
The VantageScore 3.0 ranges are:
  • 350-630: Poor credit
  • 630-690: Fair credit
  • 690-720: Good credit
  • 720-850: Excellent credit
VantageScore gives weight to certain factors differently than FICO does. VantageScore 3.0 calculates scores based on:
  • Payment history: 40%
  • Depth of credit: 21%
  • Utilization: 20%
  • Balances: 11%
  • Recent credit: 5%
  • Available credit: 3%

How to Improve Your Scores the Most

It’s important to work on improving both of your credit scores. You never know which score a creditor will want, so knowing how both work can help you decide what to fix first.
Payment history makes up the biggest part of both scores. Not missing payments and making them on time are the biggest things you can do to improve a credit score if you’ve missed payments in the past.
Many lenders and creditors have email, text and other reminders of when your bill is due. Keep a calendar of your regular bills and pay them automatically if possible.
Amounts owed, or utilization, is another big factor in determining a credit score. Using less than 30% of the credit that’s available to you is ideal. Using more than that can be a sign that you’re desperate for money or are in debt.
Credit history, or recent credit, has a bigger impact on a FICO Score than a VantageScore. What this mainly means is having credit cards and other loans for years. Applying for a new credit card because it has better perks than one you’ve had for 10 years can be a smart move, but canceling the old card will lower a credit score because it shortens your credit history.
It can also help improve a credit score by keeping your credit balances low, and having a mix of credit such as a few credit cards and home and auto loans.
You don’t have to work in raising both credit scores if you don’t want to. Ask lenders which score they’ll use. If it’s not the one you’ve been working to raise, ask if they’ll use it instead and explain why.
No one expects perfect credit on a loan application, but improving credit is always a good thing.
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