Fico Score Vs. Credit Score: What’S The Difference?

While checking your credit report and credit scores, you might find that there are many scores from various agencies calculated with different scales. This can understandably cause some confusion as to which scores are important and how they compare with each other. The two primary credit scores that consumers often encounter are FICO scores and VantageScore credit scores. While both provide an assessment of your credit risk levels, they do this through different models and scales.

That brings us to our next question, what is the FICO score?

Usually utilized is the FICO score established by Fair Isaac Corporation as the credit score. FICO scores—the most often used score that lenders prefer—form the basis of around 92% of credit decisions made in the United States. Using the information from Equifax, TransUnion, and Experian from your credit report, the computer program FICO calculates your score. After evaluating your credit data using a mathematical formula and methodology, they provide a quick evaluation of your credit risk ranging from 300 to 850. Raising the FICO score suggests little risk as judged by the credit card providers.

Depending on the kind of credit, FICO offers many different rating systems. The fundamental models consist of:

• The fundamental FICO score utilized in most credit decisions nowadays is FICO Score 8.
  
• FICO Auto Scores: They guide the judgments on auto loan creditworthiness.
  
• FICO Bankcard Scores: Help banks decide on credit cards.
  
• FICO Mortgage Scores: Help mortgage lenders assess home loans to be given to their customers.

Therefore, the main FICO score—FICO Score 8—gives the overall image that lenders like even if you do not have a single FICO score.

What is a VantageScore?

Like FICO, VantageScore is an algorithm that aggregates your credit data into a three-digit score indicative of your creditworthiness. Designed by Experian, TransUnion, and Equifax, Vantage Score aims to homogenize scoring across the three credit reporting companies. Like FICO scores, Vantage ranges from 300 to 850.

Still, unlike the FICO models, VantageScore uses distinct techniques and calculations to ascertain credit ratings. Comparatively to certain FICO versions, the VantageScore also responds faster to changes in the credit report.

FICO & VantageScore: Comparing the Two Credit Scores

While FICO and VantageScore both signal your credit risk to lenders, some key differences exist between the two models.

• Scoring Factors: The two models assign some difference to credit scoring factors such as payment history, credit utilization, and the amount of debt. This can at times lead to some scoring differences.
• Payment History: FICO provides more weightage to serious negative notations such as bankruptcies, collections, and late payments. Pattern and recency are more highly weighted in VantageScore.
• Total Debt: VantageScore differentiates between loan types better than FICO, especially for mortgages and student loans. FICO is more evenly weighted on total balances.
• Credit Mix: FICO considers account type diversification, while VantageScore does not consider credit card and installment loan mix as much.
• New Credit: Managing to open many new accounts recently affects FICO scores more than VantageScores.
• Score Used by Lenders: However, FICO is still considerably more utilized in ddecision-makingconcerning loans compared to VantageScore. However, acceptance of VantageScore increases with time, making it a viable option to consider.
• Scoring Scale: While the FICO scores take a theoretical value of between 300 and 850, the actual scores in the market are higher than those of VantageScores.

As you can see, although the FICO and VantageScore try to quantify different credit factors, they are slightly different.

Why does a Credit Reference Agency have different credit scores?

It is normal to have different scores between your FICO and VantageScore reports. First, due to the algorithmic differences between the two systems, there might be some scoring discrepancies. FICO is also the primary model used by lenders, although VantageScore is still not as widely adopted.

Larger differences can be expected when you compare various FICO score types (such as FICO 8, Auto Score, or Bankcard Score). That is because there are specific FICO models that look at your credit information through special lending characteristics. For instance, auto financing criteria are not the same as mortgage approval standards. Thus the same report gives different scores for those lending decisions.

Last but not least, it is also possible to receive different scores from Equifax, TransUnion as well as Experian themselves. Although the two credit bureaus may use the same scoring model, they may report and update your credit information at different times. Individual payments or debts will affect one report more than the other, which will change scores for a period. After new data uploads are recognized across reports, your scores generally reset.

How to Compare and Use Your Scores?

When checking your scores, first determine the specific type of score and the credit bureau that supplied it. This shows that how scores vary depends on what you are reviewing. If lenders get your credit reports, you should know what scoring model they use to know what score to shoot for.

The next step is to see where your FICO or VantageScore stands in the scoring model, as their averages are also slightly different. To assess your credit standing, compare your scores to their model-specific numerical scales.

For real learning, however, do not rely much on the numbers you get when you take the actual tests. However, when it comes to analyzing your scores, use the complete versions of your credit reports as a reference. Locate where problems or opportunities to enhance credit appear in all your reports regardless of the credit scoring model applied. Then maintaining good credit practices is continuously more crucial than specific score goals.

The Takeaway

FICO and VantageScore are two credit scores that are quite similar but are based on different algorithms and overall lending views Widespread use of FICO scores therefore makes it the standard industry score commonly applied by most credit-granting organizations. However, when looking at the picture from both perspectives of scoring, the big picture of your credit is more clear. Finally, it is long-time credit health that is of most importance to lenders, not the score per se when they are making their credit decisions.

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