Hatch Credit Blog

FICO vs. Vantage: What’s the difference, and why does it matter?

We get it. You’re hanging out with your friends on a Friday night, there’s a lull in conversation, and you all find yourselves wondering the same thing: What are the differences between FICO and Vantage and what does it mean for my credit score?

We’ve been there. And we’re here now.

The Fair Isaac Corporation has been grading credit since 1989. Since then, lenders have been using FICO scores to make all sorts of determinations about you. Are you a good investment, will you make payments on time, how much should they charge you for credit, what do you need those 10 cars for anyhow? Well, now there’s a new sheriff in town: VantageScore. :cue tumbleweed: :also shootout:

Does it matter? A little. Should you care? Maybe sometimes.

Do read on.

Both FICO and VantageScore use the same type of information (consumer credit reports) from the same sources of information (the credit bureaus Experian, Equifax, and TransUnion) to come up with models and formulas using algorithms and maths and stuff that spit out personal credit scores across the same range (300 to 850).

So, pay your bills on time, don’t maintain high account balances, and only apply for credit you need.

The differences come in the way they interpret their data and that difference can matter in a big way to you. Depending on which score a lender uses, this could mean approval or denial for the things that you want.  

Let’s break down that data by the factors that make up your credit score.

Score Factors 

Credit History

VantageScore doesn’t require as long of a credit history or activity on record at a credit reporting agency as recently. What does that mean? People who don’t even qualify for a FICO score (those who are new to credit or haven’t been using credit lately) can get credit ratings from Vantage. Look at this fancy table we made:

Inquiries

When you apply for credit, lenders will pull your credit file. This is called a hard inquiry. Which means it becomes part of your credit report. Too many hard inquiries and your credit score can be negatively affected. There is a certain window, though, that allows consumers to shop around for the best rate when applying for credit. During this window, all inquiries are treated as one. They actually call this “deduplication”. We think they could have come up with something better like…“amalgamating” or “fusionizing” or “mergemixing” but, whatever, we’re not in charge. We just like to challenge those in charge.

FICO’s window is 45 days but only covers mortgages, auto loans, and student loans. FICO also includes a buffer where hard inquiries in the past 30 days won’t show up on your current credit score. VantageScore limits their deduplisimplification efforts to 14 days but then includes all types of hard credit pulls (even credit cards). 

Utilization

When lenders pull your credit score, they see a snapshot of your credit utilization — what your current account balances and credit limits are. In other words, how much of your available credit you are using at the present time. This is the information FICO relies on. The most recent version of VantageScore, on the other hand, looks back at your history of utilization and generates trends based on patterns of behavior. Getting smarter all the time. Not us. Them. Well, it. And you.

Late Payments

There’s no hiding it, late payments hurt. While FICO is an equal opportunity penalizer of late payments (…it treats all late payments the same), VantageScore gives more weight to late mortgage payments. So it is possible for your FICO and Vantage scores to look different depending on the type of late payment.

Collections

When credit balances go unpaid they eventually get sent to collection agencies. When this happens, your credit score suffers. When calculating credit scores, some FICO scores ignore collection balances originally below $100 as well as those that have already been paid off. VantageScore only ignores paid collection accounts. 

End Game

While it’s helpful to understand the differences between methods for scoring credit, both FICO and VantageScore occasionally adjust their scoring models (VantageScore has versions 3.0 and 4.0, FICO has versions 8 and 9, with 10 and 10T on their way this summer…you get it), and lenders sometimes use their own calculations. :face palm: You can check your credit score at annualcreditreport.com for free. Don’t panic when your score looks a little different between sites. Remember, we talked about this…algorithms. The most important thing to keep in mind is that, ultimately, the same factors affect them all. So, pay your bills on time, don’t maintain high account balances, and only apply for credit you need. When that doesn’t work, try us.

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