VantageScore vs FICO Credit Score – Differences and How They Affect You

credit report climbThe term “VantageScore” has been floating around the financial sphere for some time now, but many consumers are still clueless about what it does and what it means for their credit. And with a new system for reviewing consumer credit worthiness, the VantageScore could very well completely change the way creditors look at your credit.

For years, creditors focused on the FICO score, a three-digit grade of your credit report, when deciding whether to give you that new credit card, extend a loan, or lower your rates. But a few years ago, the three credit bureaus – Equifax, TransUnion, and Experian – collaborated on a new type of credit scoring system, known as the VantageScore.

While the credit rating will still come in at three numbers based on your credit report; the VantageScore has enough differences over the FICO credit score to cause confusion. We’ll take a look at some of the differences that the VantageScore offers and what those changes mean to consumers.

VantageScore vs. FICO

The FICO credit score uses five factors from your credit report to calculate a three digit rating. Things considered in the FICO score include:

  1. Bill payment history – 35%
  2. Total owed debt – 30%
  3. Length of your credit history – 15%
  4. Mix of credit types you have – 10%
  5. How often you’ve applied for credit in the past – 10%

The calculation results in a number between 100 and 850. Most creditors set a cut off in this range. For example, a borrower with a FICO credit score below 620 is often considered subprime and will thus receive the highest interest rates, strictest terms, and more denial letters altogether.

The VantageScore, on the other hand, uses six variables from your credit report to give you both a three digit rating and a letter grade from A to F. The six variables include:

  1. Bill payment history – 32%
  2. How much of your available credit you’ve used – 23%
  3. Total debt including loans – 15%
  4. Types of credit you’ve had and the length of your credit history – 13%
  5. How often you’ve applied for credit in the past – 10%
  6. Amount of credit you have available on your credit cards – 7%

The calculation results in a credit score between 501 and 990. Every 100 points on the score also generates a letter grade. For example, a person with an 850 VantageScore would have a “B” credit rating.

Downsides to the VantageScore

Possibly the biggest downside to the VantageScore is the confusion it causes for consumers. With a FICO credit score, consumers can look at their rating and know if they’re in the subprime or prime range. It’s easy to understand what’s a good credit score. On the other hand, the higher ratings on the VantageScore may give consumers the impression that they’re in the prime range, when they’re actually considered subprime. And the accompanying letter grade only compounds this confusion.

Many consumers take issue with the letter grade in general. Since the FICO credit score relies on numbers only, a few points could make a difference on the interest rate a consumer received. With the letter grade on the VantageScore, a consumer can only receive an increase every 100 points. This means that a consumer with a 601 and a consumer with a 699 credit score will receive the same grade. If the creditor considers the letter grade when making a decision, the consumer with the higher score will receive the same rates as consumers at the lower end of the letter grade.

What the Future Holds

As of the beginning of 2011, most creditors still use the FICO credit score model. Change comes slowly in the credit and banking world and you shouldn’t expect a sudden shift to the VantageScore only model. As long as both credit scoring systems exist, creditors can use either scoring model when making their decision. However, you should order a copy of your VantageScore and learn the ropes of the new scoring system as it may become more popular as time rolls on.

Where to See Your Credit Score

For a small fee, you can order a copy of your VantageScore from Experian’s website. Experian includes some background information and a “What if” calculator so you can see how changes affect the score.

You can order a copy of your FICO credit score from Equifax. The FICO score comes with educational materials and tips on improving your credit score.

Final Word

While the new VantageScore system offers its own advantages over the old FICO score, there are still pros and cons to using each to measure your credit worthiness. To keep an eye on the fluctuations of each score and to monitor your estimated credit score, use a website like Credit Karma, which simulates both your FICO and VantageScore from a quick Transunion soft pull.

Have you taken a look at your VantageScore? What aspects of the new scoring system do you like and dislike?

  • Darice

    Wow, I didn’t even know there was a new scoring method. THANKS for the info!

  • Bruce

    I have monitored all thhe scores, including the more recent VantageScore. What I can tell you is that all 4 scores are different even though the exact same information is recorded in all 3 credit bureaus. I understand the VantageScore is different because the model is different. Tought the ranges differ, both the VanatageScore and Equifax FICO score compare to each other relatively well. For example, my Equifax credit score hovers around 802 and my VantageScore at around 945. Now Transunion boasts they use FICO, but that is mis-leading since even tom this day, they still report a lower score. My assumption based on these findings is that they still use their own scoring model and that it is not strictly FICO’s model. Experian typically falls just under Equifax’s FICO score.

    All of the scoring models are flawed anyway and soon i wont have to worry about them as i let them all go to zero due to having no debt and no plans on ever taking on any new debt in my life. This will my impact only my insurance needs, and I really don’t care about these idiots who only use scores to increase their profits.

  • Steve

    I find that my Vnatage and FICO scores vary greatly. My Vantage score states I have good credit but for some reason my FICO score states I am a risk. Exact same information is on both types of report. I monitor my credit very closely and have busted my butt to improve my credit and in FICO’s eyes it appears to have gone nowhere but the Vantage score I am seeing improvements. Can anyone explain why?

    • Angela Colley

      Its hard to say without knowing your credit history, but the differences in the two scoring models could be why you’re seeing more improvements with your Vantage score. I have noticed, with my own scores and others, that the Vantage score tends to be more on the forgiving side than the FICO score, especially for older debts. If both scores are reporting accurate information, you should see a change in your FICO score soon.