Credit University

Understanding VantageScore and FICO: A Comprehensive Comparison

The dilemma for lenders lies in choosing between FICO and VantageScore, as both present compelling attributes. This article aims to elucidate the dynamics, pros, and cons of each score

CRS CRS

December 08, 2023

Vantage Score and FICO

Introduction

Credit scores, integral in assessing creditworthiness, are intricate and often shrouded in complexity. The dilemma for lenders lies in choosing between FICO and VantageScore, as both present compelling attributes. This article aims to elucidate the dynamics, pros, and cons of each score to assist lenders in making informed decisions.

The Basics

At its core, a credit score gauges a borrower’s creditworthiness based on their financial behavior and credit history. Both FICO and VantageScore operate within this framework, with higher scores indicating lower risk.

The Similarities

FICO and VantageScore share a basic framework and utilize similar data points from credit history and financial data to evaluate borrowers. Recently, both have adopted a scale ranging from 300 to 850. Despite this commonality, their inputs and outcomes differ significantly.

The Differences

Founding:

FICO, the longstanding industry standard, originated nearly 70 years ago and is solely owned by Fair Isaac Corporation.

In contrast, VantageScore emerged in 2006, jointly created by the three major credit bureaus – Equifax, TransUnion, and Experian – to challenge FICO’s dominance.

Scoring System:

While both scores use the 300 to 850 scale, their scoring ranges vary due to differences in data point emphasis.

FICO vs VantageScore

Criteria Emphasis:

FICO prioritizes payment history, amounts owed, and credit history length, constituting 80% of the score. VantageScore places greater importance on payment history, utilization, and credit age, also accounting for over 80% of the score.

How to Choose

Factors influencing the choice between VantageScore and FICO include:

  • A More Inclusive Range: VantageScore may be more forgiving of lower scores, potentially expanding the pool of prospective borrowers.
  • Emphasis on Recent Consumer Behavior: VantageScore focuses more on the last 24 months of credit history, making it advantageous for lenders concerned with recent credit behavior or catering to a younger demographic.
  • Comprehensive Data: VantageScore incorporates data from all three major credit bureaus, offering broader accessibility compared to FICO.
  • Data Utilization: VantageScore’s adaptability allows it to create reports with limited data points, making it suitable for borrowers with thin credit files.
  • Holistic Approach: VantageScore’s universal model provides a consistent evaluation across various financial products, beneficial for lenders working across niches.
  • Established Track Record: FICO scores have a well-established history, demonstrating their longevity and widespread acceptance in the industry.
  • Industry Prevalence: FICO scores are commonly utilized by numerous lenders, contributing to an industry-wide standardization that facilitates ease of comparison and decision-making.

Conclusion

The choice between VantageScore and FICO is nuanced and depends on lenders’ specific needs. VantageScore, despite being a relative newcomer, presents a credible alternative to FICO, catering to diverse lending scenarios.

For a more in-depth understanding of these scores and their suitability for your lending needs, reach out to your CRS sales representative.

Other articles

CRS can satisfy the most challenging credit data requirements. Try us.

© 2024 CRS Group, Inc.