You might be familiar with the idea of a singular credit score, but there’s actually two major credit score providers that rate your creditworthiness: FICO and VantageScore. While FICO is used for 90% of all lending decisions, VantageScore can still play a role in whether you get approved for a loan. Here’s what you need to know.
What are FICO and VantageScore credit scores?
FICO and VantageScore are similar in that, for the most part, your score is ranked on a 300 to 850 scale (versions preceding VantageScore 3.0 range from 501 to 990), based on data collected by the three credit bureaus: Experian, TransUnion and Equifax.
Although FICO compiles credit scores based on data from the major credit bureaus, it does not collect credit report data on its own. To compete with FICO, the three bureaus created VantageScore in 2006. Both FICO and VantageScore base their scores on your credit history, but they are weighted differently:
What makes up your FICO 8 score?35% payment history30% level of debt/amounts owed15% age/length of credit history10% types of credit/credit mix10% credit inquiries/new credit
What makes up your VantageScore?40% payment history21% age and type of credit20% percent of credit used11% total balances/debt5% recent credit behavior and inquiries3% available credit
Confusingly, each credit score has different versions with slightly different weighting, kind of like software updates. With FICO, however, there are scores designed for specific situations, like applying for a mortgage or a car, although it’s not always clear which one a lender will use.
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What’s the difference between the scores?
FICO is much more commonly used—if you apply for a loan, credit card, or some other type of financing, the lender is most likely using your FICO 8 score when reviewing your application. There are other differences relating to weighting, too, as FICO treats all late payments equally, whereas VantageScore has harsher penalties for late mortgage payments. FICO also puts more weight on your current credit balances than VantageScore, which has more emphasis on the length of your credit history and the types of credit you carry. FICO also compiles a separate score for each of the three bureaus, unlike VantageScore, which reports just one number.
Per the Points Guy, VantageScore is increasingly popular, but it’s mostly used for educational purposes (like the “free credit score” that you get from apps like Credit Karma), pre-qualification screenings for credit cards, and non-financial score checks (such as an apartment application). Nevertheless, a lender still might use it for other approvals, too, as lenders often use a variety of information to evaluate your creditworthiness, so you don’t want to ignore it, either.
Do I really need to track all my credit scores?
No, because it’s impractical to track dozens of scores. Your best bet is to keep a close eye on the FICO score provided by your bank (monthly, or even weekly), and check your VantageScore once in a while too (like, once a quarter), just in case it drops unexpectedly due to a missing payment or fraudulent purchases.
You’ll also want to check your credit history reports every few months, if you can, especially since you can request them for free until April 2022, here.