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FICO v. VantageScore

The more you learn about your credit the more you understand the importance of maintaining a good credit score.  In fact, most credit reporting agencies now offer a “free score” with a copy of your report so that you can ensure your score is decent enough to earn you favorable interest rates, new credit and larger loans.  Each consumer, believe it or not, has over 50 different credit scores but there are two types of scores that are most commonly used in the credit granting industry, Fair Isaac Corporation (“FICO”) and VantageScore.  

The reason for so many types of credit scores is simple, different lenders value different types of credit use and payment to evaluate your credit worthiness.  For example, a mortgage lender uses one type of score that will allow it to determine what size mortgage loan and what interest rate it is willing to approve you for.  A mortgage lender would be more concerned with the potential for liens to be placed on the property.  On the other hand, a credit card company may be more interested in seeing that you have a history of having credit cards and paying regularly on them, or automobile lender may evaluate you based upon how economically stable you appear you can be during the life of the loan.  There are different scoring models that favor different aspects of your credit history, and each of these types of lenders may want that particular kind of score.   

The two most common scoring methods, FICO and VantageScore, are both provided by the three big credit reporting agencies, Equifax, Experian and Trans Union.  FICO is the oldest scoring model, established in the 1950s. VantageScore was established within the last ten years by the credit reporting agencies themselves to compete with FICO.  FICO uses its scoring model by evaluating your information to calculate the risk in lending you money.  Over the years, FICO has created a number of different credit scores including its generic FICO Score, a mortgage score, an auto score, a bankcard score, an installment loan score and a personal finance score.  Each of these scores will help you to determine your credit worthiness and eligibility based on the type of loan you are looking for.  This is just six scores for FICO alone.  

The VantageScore is a collaboration amongst the three credit bureaus and is a scoring model owned by the reporting agencies. Just like FICO, VantageScore can issue credit scores for both consumers and lenders.  VantageScore 3.0, a newly drafted version of this score, allows consumers who previously did not have enough financial information to obtain a score to receive one using a variety of additional factors.  VantageScore 3.0 allows consumers to understand how their score is calculated using a reason code, so you can see what factors make your score high or low.  Even though VantageScore was created by all three credit reporting agencies, each agency may have a slightly different score for you.  VantageScore, just like FICO uses the information contained in your report to calculate your score.  Depending on each agency and the information in each report your score may vary.    

Both FICO and VantageScore use the exact same number range in ranking each consumer’s credit score, 300 to 850.  So how do you know what equates to a good score?  Lenders say the breakdown goes something like the following……below a 619 is a poor score, 620 to 659 fair,660 to 699 good, 700 to 759 is very good and 760 + is considered excellent.  The good news is two different scoring models can mean good things for consumers, more than one number to base a credit lending decision on.  

If you would like additional information regarding your credit score or credit report contact SmithMarco P.C. for a completely free case review.

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