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You might think there’s nodifference between yourFICO score and credit score, butyou likely have several credit scores and each can impact your overall financial health differently. Learn how financial institutions use these different scores to evaluate the kind of borrower you’re likely to be. If you have a history of debt or other shaky credit behavior, you need to understand your credit history and do everything you can toraise your credit score.
FICO vs. Credit Score
The big threecredit bureaus — Equifax,Experianand TransUnion — compile information about your borrowing habits and use it to create detailed credit reports. Several companies create credit scores by using the data in your credit report. TheFICO credit scoreis the most commonly used credit score. It was invented by FICO, the Fair Isaac Corporation. Like allcredit scores, it’s used by lenders to determine your dependability as a borrower.
Your FICO score is not your only credit score. You have many, including VantageScore and other specialty scores used by banks,landlordsand insurers. The scores can differ because data collected from one credit reporting agency might be different from the data collected by another agency. The various companies behind credit scores might also weigh information in different ways. Banks and other lenders use different sources to evaluate your creditworthiness, gathering scores from the credit bureaus fordifferent types of credit applications— and they sometimes create their own scores by combining the data.
“All credit scores use the same information from your credit report, but they treat the information slightly differently to meet the needs of the particular lender,” according to Experian.
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FICO vs. VantageScore
VantageScore is another well-known credit score. Unveiled byEquifax,Experianand TransUnion in 2006, it also helps lenders estimate a borrower’s risk.Many scoring models don’t consider borrowers who are new to the credit market or who use credit infrequently, but VantageScore has said its most recent model — VantageScore 3.0 —provides scores for 30 to 35 million consumers who might otherwisebe invisible to lenders.That’s because VantageScorerequires only one month of credit history before it generates a score for you, compared to many traditional models which require six months of activity.
A major difference between the FICO and VantageScore models is that each uses different information to compute your score.
YourFICO scoreis comprised of five components:
- Payment history: 35 percent
- Amounts owed: 30 percent
- Length ofcredit history: 15 percent
- New credit: 10 percent
- Credit mix: 10 percent
Comparatively, your VantageScore is comprised of six components:
- Payment history: 40 percent
- Depth of credit:21 percent
- Utilization: 20 percent
- Balances: 11 percent
- Recent credit: 5 percent
- Available credit: 3 percent
Plan for the Future:7 New Ways Your Credit Rating Will Be Scored Over the Next 5 Years
Which Score Do Lenders Use?
Although lenders and credit companiesuse both the FICO score and the VantageScore, FICO remains the clear winner for now.Ninety percent of lenders still use FICO scores, according to FICO.VantageScore, however, is gaining traction with seven out of 10 financial institutions, six out of 10 credit card issuers, four of the top 10 auto lenders and four of the top five mortgage lenders using its scoring model, according to information on the Experian website.
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Althoughboth scoring systems currently scoreborrowerson a scale from 300 to 850, the categories differ. See where you fall on each scale and determineif you have a good credit score.
FICO
- Exceptional: 800 and higher
- Very good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Poor: 579 and lower
VantageScore
- Excellent: Above 720
- Good: 690 to 720
- Fair: 630 to 690
- Poor: Under 630
Related:8 Ways to Get an 800 Credit Score
Monitoring Your Credit Score
You can get yourfree credit scorebased on the FICO scoring model by visiting FreeCreditScore.com. You’ll also get a free copy of your Experian report when you register for the free credit score. Both the score and the report are available to you upon sign-in every 30 days.
Visit sites like Credit Karma or LendingTree to sign up and receive your Vantage credit score for free.
Everyone is entitled to a free credit report from each of three credit bureaus each year according to federal law. Just visit AnnualCreditReport.com to request your reports. Getting a copy of each of your credit reports allows you to verify that all the information is updated and correct, and see the reasons behind your credit scores.
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