When it comes to understanding your credit score, two terms that are often mentioned are FICO and VantageScore. These are the two most popular credit scoring models used by lenders to determine an individual’s creditworthiness. While both FICO and VantageScore serve the same purpose, there are some key differences between the two that borrowers should be aware of.
FICO, which stands for Fair Isaac Corporation, is the older of the two scoring models and has been around since the 1980s. It is widely used by lenders and is considered the gold standard in credit scoring. FICO scores range from 300 to 850, with higher scores indicating better creditworthiness. The factors that go into calculating a FICO score include payment history, credit utilization, length of credit history, new credit, and types of credit used.
On the other hand, VantageScore was created in 2006 by the three major credit bureaus – Experian, Equifax, and TransUnion – as a competitor to the FICO model. VantageScore ranges from 300 to 850, just like FICO, and takes into account similar factors when calculating a credit score. However, VantageScore places a greater emphasis on the last 24 months of credit history and trends in a borrower’s credit behavior.
So, what sets FICO and VantageScore apart? One of the main differences between the two scoring models is how they weight certain factors. For example, FICO places more emphasis on payment history, while VantageScore may give more weight to credit utilization. This means that the same borrower could have different credit scores under each model, depending on their financial habits.
Another key difference between FICO and VantageScore is how they treat certain types of credit inquiries. FICO treats all inquiries made within a 45-day period for the same type of credit (such as a mortgage or auto loan) as a single inquiry, while VantageScore only considers inquiries made within a 14-day period as a single inquiry. This means that borrowers who are shopping around for the best interest rate on a loan may see a slight difference in their credit scores under each model.
In conclusion, understanding the differences between FICO and VantageScore can help borrowers better manage their credit and make informed financial decisions. Both scoring models are used by lenders to evaluate credit risk, so it is important to know how they work and what factors they consider. Whether you are monitoring your credit score through amsher collection services or applying for a loan, having a good understanding of FICO and VantageScore can help you achieve your financial goals.
