CREDIT

Comparing Credit Score Models

Even for those with excellent credit, it may be a bit of a surprise to see their credit score fluctuate based upon the scoring model used: FICO Score or VantageScore. Have you ever wondered, “What’s the difference between a FICO and VantageScore?” I am here to answer that question, compare the credit scoring models, and foster a better understanding of one aspect that determines your credit score.

Scoring Model History:

The oldest running scoring model is FICO, which was created in 1956 by an engineer and mathematician, Bill Fair and Earl Isaac. VantageScore was jointly founded in 2006 by the three major credit reporting companies: Experian, TransUnion, and Equifax.

Scoring Model Purpose:

The objective of each model is to generate credit scores based upon a proven scientific method that predicts the likelihood someone will pay a bill 90 or more days late in a 24-month period. This is why it is important for consumers to heavily focus on making on-time payments to all their loans and credit cards. The longer you uphold a positive relationship with your lenders, the more your credit score should grow. Both companies create credit scores using reports managed by the three main credit bureaus: Equifax, Experian, and TransUnion.

Similarities between FICO Score and VantageScore:

Both scoring models use a range of 300 – 850 points and are partially determined by a set of scoring factors:

• Your payment history
• Your credit utilization, or the overall percentage of your credit limit used
• The length of your credit history and your mix of credit accounts
• Balances owed
• Your recent credit behavior (inquiries or new lines)

Major differences between FICO Score and VantageScore:

Even though both scoring models have the same purpose and take the same scoring factors into consideration, the reason they may produce a different credit score is because each model scores these factors differently. For example:

Age of Credit

One key difference is how long a trade line, or line of credit, needs to be active before each scoring model will take it into consideration. For instance, FICO score requires a line of credit to be open for a minimum of 6 months and must have reported to all three credit bureaus in the last 3 months. Meanwhile, VantageScore requires a line of credit to be open for a minimum of 1 month and reported to only one bureau in the last 2 years.

For example, that new credit card you opened 3 months ago and have been paying off monthly will only be counted in one model, thus creating a variation in your credit score.

Scoring Values

A second key difference is that each model gives different weights to each category. Both models weigh payment history as top priority when scoring, however, FICO gives it 35% value, while VantageScore labels it as “extremely influential.” Another example can be seen in scoring the amounts an individual may owe. FICO weighs the amount you owe as 30% of your score, while VantageScore labels it as “highly influential.”

Comparing numbers to descriptions is like comparing apples to oranges. They’re both in the category of fruit but with very different flavors and textures.

Making the credit scoring models irrelevant:

As you can see, there many similarities and differences between the two major credit scoring companies. However, no matter what credit scoring company is used, caring for your credit by making payments on time, minimizing credit inquiries, keeping credit card balances low or paying them off entirely, and saving to avoid taking out loans for emergencies will make the model used irrelevant and only positively impact your credit score.

Sources:

• https://www.forbes.com/advisor/credit-score/fico-vs-vantagescore-credit-scores-whats-the-difference/
• https://www.equifax.com/personal/education/credit/score/difference-between-fico-scores-vantagescore/#:~:text=The%20time%20period%2C%20however%2C%20generally,of%20credit%2C%20including%20credit%20cards.