Home > Credit Score > FICO vs. VantageScore: The Credit Score Rivalry Heats Up

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VantageScore is making headway into the credit score market dominated by FICO, says the firm behind the upstart measure of credit-worthiness.

Nearly one billion VantageScores were generated in 2014 — a 600% increase — says VantageScore Solutions LLC, a creation of the nation’s three credit bureaus. The number of banks using the scores increased by 24%.

The VantageScore was created in 2006 by Equifax, Experian and TransUnion as a competitor to the FICO score. The FICO score uses credit bureau data, but was invented and controlled by Fair Isaac Corporation, a separate firm.

FICO remains the industry standard. FICO scores are used in “more than 90% of lending decisions,” and by 90 of the top 100 largest U.S. financial institutions, FICO says on its website. FICO sold just under 11 billion scores during fiscal year 2014, according to spokesman Jeffrey Scott.

“To the extent that VantageScore is gaining traction, it’s not at FICO’s expense. We are not aware of any significant bank or lending institution that’s replacing FICO with VantageScore” Scott said. “We have not seen any erosion in FICO (sales). The score business is growing nicely.”

Both VantageScores and FICO scores are now widely available to consumers. The latest version of the VantageScore (VantageScore 3) can be obtained for free every month on Credit.com. More recently, several credit card issuers have begun offering FICO scores to account holders.

Barrett Burns, president and CEO of VantageScore Solutions LLC, says it’s good to have multiple sources for credit scores.

“With this surge in market adoption, the consumer finance industry, including the largest banks in the country, clearly have voted for choice in the marketplace and are taking advantage of the transformative differentiators offered by the VantageScore model,” Burns said.

VantageScore says its scores use a broader set of criteria that allows an additional 30-35 million consumers to be scored, giving that group better access to America’s credit system.

“Among those consumers conventionally unscoreable, 10 million are attractive loan candidates, with scores of 600 and above on the VantageScore 3.0 scale range of 300-850,” the firm says.

One of the most common credit score misconceptions is that you have only one score; in reality, you have several dozen credit scores. Consumers in fact have multiple FICO scores, which can vary based on which credit bureau is used to supply the data used in the scoring formula. In additional, many financial institutions make adjustments to scoring formulas so they are more specific to their credit business. For example, an auto lender might more heavily weight auto payment history.

For a consumer who is monitoring their credit scores to check their progress as they build or rebuild credit, it’s helpful to compare the same score over time for consistency. You should also review your credit report from each of the three major credit reporting agencies, since the data in your credit reports are what your credit scores are based on. You can get your credit reports for free once a year under federal law.

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  • http://www.Credit.com/ Gerri Detweiler

    I can’t speak for FICO or VantageScore but I imagine that once there is more experience with these payments they will be able to include them when credit scores are calculated. I imagine it’s partly a chicken or egg problem – they need more of this information in order to see how it helps them make credit decisions.

  • Probable Reason

    They probably don’t include “rent” as part of a CREDIT store, because its not Credit. This is shopping — a purchase. You pay your rent in advance (99% of the time with a deposit, which kicks in if you don’t pay). It has nothing do with your credit or your credit worthiness, because everyone needs to live somewhere. The only time rent is important….. is if someone doesn’t pay. But even then they either get kicked out of their rental within 30 days or the deposit covers the bill. You pay your rent with “money in the bank” (by check or cash). For those lucky enough to be allowed to pay by credit card, that is a matter of credit card credit, not rental credit (the rent is still paid for in cash up front by the bank). So its not a good indicator of how someone will do on a Loan or with Credit. You might as well score people based on buying sandwiches for lunch using cash.

    (“Well, I always pay for my lunch, shouldn’t I qualify for a home loan too?” No, because everyone pays for their lunch, everyone pays for their rent, its not extended credit.)

    By contrast, things like Cell phone bills, Electric bills, and actual Loans are paid AFTER receiving something and using it. This represents true Credit (where someone has extended something to you first, and you pay LATER). In case of rentals, its totally opposite — you pay first, and then you enjoy later (just like buying a sandwich for lunch with cash, which also is not Credit, unless you use a Credit card, of course).

    Now maybe there should be flexibility in this. Maybe some landlords do extend terms to their tenants. But its pretty rare, because they almost ALL collect a deposit as well that would cover any month’s loss (making it, again, a payment, not credit).

    Just 2 cents.

  • James Alias

    I absolutely hate the vantage score. It makes my credit look terrible compared to FICO as it discounts my long long perfect on-time credit history and looks too much as the short term trend of new lines of credit or current short term debt, It is like planning your planting season based upon the weather last week versus better weather models, just because it has rained a lot in one week doesn’t mean the whole year will be a washout. The FICO is a proven score that works and works for a reason and history is more important than this week or next.

    What is worse is everyone is giving out free vantage scores, which don’t mean anything. I am sure someone with a mortgage and a good FICO score pays their utility bills on time, I am less certain about someone with less skin in the game. Just because you pay your cell phone bill on-time doesn’t make you a good long term credit risk. The FICO score is not perfect, it doesn’t take into count social influences which are a big factor upon credit worthiness. However, the federal government almost prevents this from being considered by FICO and banks.

    On the other hand credit card companies often take this to the extreme. Say you decide to buy groceries or pay the electric bill with your credit card to get points or cash back, just because it is groceries versus a fancy handbag they are more likely to cut your credit without asking why.

    • Guest

      There’s always two sides to a story. Yes comparing short term history vs a long term history may seem trivial as to long term history being way better. But everyone’s situation sometimes changes. Just because someone had a good credit history a long time ago does not mean they will be a good credit risk in the here and now. Maybe their financial situation changed or some other circumstance changed. Versus someone who’s long ago history wasn’t good for whatever reason and now their current credit paying situation is perfect is being heavily penalized on something that happened a very long time ago isn’t fair either. When they are actually proving right now that they are paying consistently in the here and now. I have a friend who’s score is way higher with vantage scoring and his financial situation is solid now compared to 6 years ago. So there are always two sides to the story. It would be nice to have a happy medium. Just my 2 cents.

  • heavyw8t

    “The VantageScore was created in 2006 by Equifax, Experian and TransUnion as a competitor to the FICO score. ”

    If that is the case, then why do the bureaus still give FICO scores instead of Vantage? Or better still, why don’t the bureaus give both? If Vantage is truly now the more often used score by lenders, it seems that the bureaus should give both.

    • buckh

      Nothing makes “sense” in the lending business except for how much more money the lender can extract from the loan. They will double talk the borrower into complete confusion when trying to “explain” (justify) their methods for determining how much interest they are going to charge the borrower.Its all up to the borrower to decide to submit or go elsewhere.

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