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