When it comes to credit scores, there are two main players in the game: VantageScore and FICO. While both provide a credit score based on an individual’s credit history, there are some differences between the two that consumers should be aware of.
First, it’s important to understand what each score measures. VantageScore was created in 2006 by the three major credit bureaus (Experian, Equifax, and TransUnion) as a competitor to FICO. The score ranges from 300 to 850, with a higher score indicating better creditworthiness. FICO, on the other hand, has been around since the 1950s and is still the industry standard. It ranges from 300 to 850 as well.
One of the main differences between VantageScore and FICO is the way they weigh certain factors. VantageScore places a greater emphasis on payment history, while FICO takes a more holistic approach and considers factors such as the length of credit history, types of credit used, and the amount of debt owed.
Another difference is how they treat credit inquiries. VantageScore considers all credit inquiries made within a 14-day period as a single inquiry, while FICO only does this for mortgage or auto loan inquiries. This means that if you’re shopping around for a car loan or mortgage, your credit score may be negatively affected by multiple inquiries with FICO, but not with VantageScore.
Both VantageScore and FICO also have different versions of their scores tailored to specific industries, such as credit cards, auto loans, or mortgages. It’s important to know which version of the score is being used by lenders or creditors when applying for credit.
So, which score is better? The answer depends on who you ask. Some lenders may prefer one score over the other, while others may use both. Ultimately, it’s important to monitor both scores and ensure that your credit history is accurate and up to date. Whether it’s VantageScore or FICO, a good credit score can lead to better interest rates on loans and credit cards, as well as increasing your chances of approval for credit applications.
In summary, both VantageScore and FICO provide credit scores based on an individual’s credit history, but weigh certain factors differently. It’s important to monitor both scores and ensure that your credit history is accurate and up to date in order to improve your chances of approval for credit applications. Knowing which score is being used by lenders or creditors can also be helpful in understanding how credit decisions are made.