VantageScore® Model vs. FICO® Model
Just like every other industry, the financial services sector continually evolves. Whether it be automated teller machines (ATMs) in 1969, internet banking in 1983, or chipped smart debit and credit cards in 2015, banking technology and services constantly seek to identify better ways to serve members/customer. Personal credit scoring is no exception to this.
Seeking Consistency | Developing the VantageScore model
The three major credit bureaus -- Equifax, Experian and TransUnion -- determined that creating a single credit scoring model that would be consistent among all three credit bureaus would not only make it easier for financial institutions to make intelligent lending decisions, but would also generate credit scores for millions of consumers who were previously unscoreable. Prior to the development of VantageScore in 2006, each of the three bureaus used their own credit scoring model, leading to differences in credit scores even for the same credit report. VantageScore 3.0, the current model, was created in 2016.
Similar, but Different | How VantageScore 3.0 differs from FICO 8
While VantageScore 3.0 and FICO 8 share a fair amount of similarity, four slight differences exist between the two models.
Length of required credit history. In order to generate a FICO Score, a consumer must have one or more credit accounts open for a minimum of six months and at least one account that has reported to the credit bureaus within the past six months. Conversely, VantageScore can utilize credit data from just a single month's history and with one account having reported within the prior 24 months. This means the VantageScore model is more likely to be able to score individuals who are new to credit and/or use it less frequently.
Number of credit inquiries. Applications for credit cards, mortgages, auto loans or other financing can negatively impact your credit score. It makes good sense to apply for multiple credit lines to ensure you receive the best deal you can, but this can also negatively impact your score if multiple inquiries are too far apart. The FICO Score model considers multiple inquiries for the same type of credit within a 45-day period as single inquiries. The VantageScore model allows for multiple inquiries to be considered a single inquiry within a reduced 14-day period, but also allows for different inquiry types (i.e.. auto and mortgage) within that 14-day stretch to be considered a single inquiry.
Consideration of trends. The FICO model generates your credit score based upon borrowing and credit utilization reported to the credit bureaus at the time the score is generated. Conversely, the VantageScore model considers data that shows patterns of behavior over time. To use a travel analogy, your FICO score typically shows that you've arrived at a particular location, it doesn't really care how you got there. Your VantageScore score, on the other hand, may award additional consideration for responsible "routes" you took along the way.
Scoring criteria weighting. Both FICO 8 and VantageScore 3.0 use similar scoring criteria, but the criteria are weighted a bit differently. Below is a comparison of the criteria and associated weighting that comprises the two models.
Truly, the FICO and VantageScore models share far more similarities than differences. Both models seek to offer a fair estimation of creditworthiness to the borrower and lender, alike. It's important to be mindful that "credit-positive" behaviors like responsible use of credit, practicing good budgeting habits and paying bills on time, will generally reward you with a higher score for both models.
Transparency & Inclusiveness | VantageScore 3.0 offers benefits to consumers
On February 1, 2020, 4Front began utilizing VantageScore 3.0 in its rating of loan products. We've made this change for a several reasons. First, we're committed to transparency. It's important to us that our members have ready access to the same credit scoring model we use to determine credit-worthiness. The updated score and credit considerations members can access with Credit Score is the very same information 4Front will utilize when decisioning loan applications. Our members should possess peace of mind, knowing their current credit score and enjoy more control as they work to protect or improve their scores.
VantageScore 3.0 offers additional advantages to consumers. VantageScore 3.0 allows those new to credit to be scored sooner due to its expanded 300 - 850 scoring range. An individual scoring closer to 300 isn't likely to qualify for many credit offerings, but the perspective gained from being scored can assist them as they build their credit. Additionally, individuals who have experienced minor setbacks, including delinquencies incurred during natural disasters and paid collections, will find VantageScore 3.0 significantly more forgiving for these bumps in the road.Go to main navigation