What are FICO and VANTAGE Score?
What are FICO and VANTAGE Score?
Wondering what are FICO and Vantage score? Are they different or the same methods? In that case, you need to read the article to get an idea of how these two scoring methods use different approaches.
What Is a Vantage Score?
It is a credit score created by three major credit bureaus. This score helps to predict the chances of a borrower to repay the money. Landlords, a financial institution like banks, and other lenders use Vantage Score to determine a borrower’s creditworthiness.
Equifax, Experian, and TransUnion came together in 2006 and decided on the algorithm to create Vantage Score. The idea was to build a mechanism that can compete with the popular credit scoring method, FICO. Not to mention, consumers can also use this credit scoring method for free.
What is a FICO Score?
This is a three-digit score calculated using the information present in your credit reports. Like the vantage scoring method, it helps lenders to identify if borrowers can repay their loans. This also largely depends on how much money you borrow, how much interest rate you have to pay, and how much time you have to repay.
Whenever you apply for a loan, the company or the lender needs a consistent and fast way to determine whether you are eligible for a loan. In that case, they will look for your FICO scores. You can consider FICO as a summary of the information in your credit report. It includes how much credit you have, how long you have had credit, and do you pay monthly minimum payments on time.
Not only is it an excellent method that helps lenders to make quick decisions, but it also helps people to get fast and fair access to credit when they need it.
Vantage Score and FICO Score: What’s the Difference
The biggest difference between these two scoring methods is the scoring range. FICO score use credit range from 300 to 850. On the other hand, Vantage uses a 501 to 990 scoring range. This is why Vantage and FICO scores conversion becomes necessary for both lenders and consumers to determine their credit rating strength. Because of the shift of the Vantage 3.0, both the scoring frameworks now work on the same scales. Although both scoring systems consider the same numerical range, the scores can greatly vary because of the difference in criteria to analyze possible credit risks.
FICO uses the following five key factors for calculating scores.
- Current credit balances: 30%
- Payment history: 35%
- New credit approvals and applications: 10%
- Length of credit history: 15%
- Existing mix of lending products and credit accounts: 10%
Meanwhile, Vantage uses the following six factors.
- Payment history: 40%
- Current credit utilization: 20%
- Length of credit history and types of credit used: 21%
- Credit applications or Recent loan: 5%
- Current credit balances: 11%
- Available credit amounts: 3%
For a Good Vantage and FICO Score, What You Need to Do?
As both scoring methods are calculated using your credit report, you need to keep it clean. Here is what you need to do.
- Pay your bills and monthly minimum payments on time
- Maintain your credit cards balance low
- Manage your debt
- Make smart credit choices
- Don’t close old credit cards
- Check your credit report regularly
- Limit your application for new credit
Bottom Line
Both Vantage Score and FICO score have equal importance. The best part is if you maintain a good credit report, you can get an excellent credit score from both credit score calculation methods. For assistance and questions regarding credit restoration contact a professional counselor at Noraveni Credit Repair.