The Difference Between FICO Versus Vantage Score

This guide covers the difference between FICO versus Vantage Score. In personal finance, credit scores are crucial in determining your Eligibility for various financial products, including mortgages. Two names stand out regarding credit scoring models: FICO versus Vantage Score.

These credit scoring systems play a crucial role in determining a person’s creditworthiness and are used by lenders across the United States for evaluating loan applications.

While they share the same objective, there are notable differences between them. In this article, we will explore the key features of FICO and VantageScore, analyze their differences, and consider their impact on your mortgage application.  In the following paragraphs, we will discuss the difference between FICO versus Vantage Score.

What are Credit Bureaus? 

There are three major credit bureaus in the United States: Equifax, Experian, and TransUnion. They are credit reporting agencies that collect and maintain your credit information. They gather data about your borrowing and repayment activities, including credit cards, loans, and payment history. Lenders refer to these credit bureaus to assess the risks involved in lending to you. 

What is the Difference Between FICO Versus Vantage Score? FICO Score – the Traditional Model 

The most well-known and widely used credit scoring model is the FICO score. Developed by the Fair Isaac Corporation (FICO) in 1989, the FICO score has existed for over three decades. FICO scores range from 300 to 850 and are calculated based on the following factors:  

• Payment history
• Amount owed
• Length of credit history
• Credit mix
• New credit

One of the strengths of the FICO Score is its long-established track record. Lenders have relied on FICO scores for years, and many still consider it a gold standard. According to a survey conducted by the Consumer Financial Protection Bureau (CFPB), about 90% of top lenders in the US use FICO scores to make lending decisions [^1^]. 

VantageScore – the Newcomer 

A relatively newer credit scoring model, VantageScore, was developed jointly by the three major credit bureaus (Equifax et al.) to provide an alternative to FICO scores. Just like FICO scores, VantageScores range from 300 to 850, with higher scores reflecting better creditworthiness and consider factors such as:

• Payment history
• Age and type of credit
• Percentage of credit limit used
• Total balances/debts
• Recent credit behavior
• Available credit

One notable aspect of VantageScore is its emphasis on alternative credit data. VantageScore claims to consider a broader range of information compared to FICO, including rent payments, utility bill payments, and trended data. This approach aims to provide a more comprehensive picture of an individual’s creditworthiness, particularly those with limited credit history. VantageScore states that its model can score 30-35 million more consumers than traditional scoring methods. 

Key Differences Between FICO Versus Vantage Score

While both FICO and VantageScore serve the same purpose, it is important to note some key differences between them. FICO versus VantageScore may use slightly different algorithms to calculate credit scores. These algorithms are proprietary and closely guarded secrets. Consequently, consumers might receive slightly different scores from each model, although the overall trends are usually similar. 

Industry Preferences

Different lenders and institutions have varying preferences for scoring models. While FICO is more commonly used across various lending sectors, VantageScore is gaining momentum, especially in the mortgage industry. According to a report by Inside Mortgage Finance, 20% of new mortgage originations in 2019 used VantageScore [^2^]. 

Credit Score Access of FICO Versus Vantage Score

FICO allows consumers to access their credit scores from all three bureaus for a fee. At the same time, VantageScore offers free access to credit scores through resources such as Credit Karma or their website. This difference in accessibility can influence a consumer’s choice for credit monitoring. 

The FICO Score and VantageScore are two distinct credit scoring models lenders use to assess a person’s creditworthiness.

While FICO has been an industry standard for years, VantageScore offers a fresh approach, incorporating alternative credit data and catering to individuals with limited credit history. Ultimately, the choice between FICO and VantageScore may depend on lenders’ preferences and the industry in which the credit assessment is being made. 

Understanding FICO Versus Vantage Score Impact on Your Mortgage 

For many individuals, buying a home is a significant milestone in their life, but to do that, you must obtain a mortgage. It would help if you showed lenders that you can repay borrowed money to get a mortgage. Here is how FICO and VantageScore can affect your mortgage: 

Impact on Mortgage Interest Rates and Terms

One significant way your credit score affects your mortgage is its impact on interest rates and terms. Lenders use your credit score as a determining factor in setting the interest rate for your mortgage.

A higher credit score often results in a lower interest rate, saving you money over the life of your loan. Conversely, a lower credit score may lead to higher interest rates or less favorable terms. 

According to a study by LendingTree, borrowers with excellent credit scores (above 760) received an average interest rate of around 3.67% for a 30-year fixed-rate mortgage in 2020. On the other hand, borrowers with credit scores below 620 received an average rate of approximately 4.99%[^3^]. This shows how significant your credit score’s impact can affect your mortgage’s overall cost. 

FICO Versus Vantage Score: Different Scoring Models, Similar Goals 

Both FICO versus Vantage Score strive to assess your creditworthiness; hence, monitoring and maintaining a good score in both models is crucial. Good payment history, low balances, and responsible credit use will positively impact your scores across both scoring models, making you an attractive borrower to lenders. 

Scoring Variations FICO Versus Vantage Score Can Impact Eligibility 

While the general principles of assessing creditworthiness remain the same, different factors may influence scores in FICO versus Vantage Score. As a result, borrowers may have slightly different scores between the two models. Therefore, reviewing your FICO and VantageScore is recommended, and working towards improving both to maximize your chances when applying for a mortgage. 

Understanding FICO Versus Vantage Score

Understanding credit bureaus and the differences between FICO and VantageScore is essential for anyone seeking a mortgage or loan. Even though lenders have varying preferences, both scoring models aim to assess your creditworthiness. To increase your chances of securing a favorable mortgage offer, you must maintain a good payment history, manage debt responsibly, and regularly monitor your credit scores. Remember, responsible credit behavior benefits you regardless of the scoring model used.