Posted by: John S Kiernan

FICO and VantageScore are the two top dogs of the credit-scoring market. So for your wallet’s sake, it’s important to understand what distinguishes them.

Here’s what you need to know:

VantageScore vs. FICO Score – Key Differences

	VantageScore	FICO
Most Popular Model	VantageScore 3.0	FICO Score 8
Score Range	300 to 850	300 to 850
Scoreable Population	225 million	190 million
Share of Lenders Using Score	80% of the 25 largest lenders	90% of the 100 largest lenders
Scores Issued per Year	8 billion	10 billion
Recent Credit Experience Needed for Score	1 month	6 months
Inquiry Grouping Period*	14 days	30-45 days
Late-Payment Damage	Missed mortgage payments are more damaging than other types	Late payments are treated equally, regardless of account type
Treatment of Collection Accounts	Once paid, collection accounts stop being considered	Collection accounts with original balances under $100 aren’t considered
Authorized Users	Moderate credit-building capacity	Limited credit-building capacity
Free Providers	• WalletHub • Bankrate • Capital One • Credit Karma • Mint • See More	• American Express • Bank of America • Barclays • Chase • Citi • Discover • See More

You can see where your credit stands according to the VantageScore 3.0 model by signing up for a free WalletHub account. WalletHub is the only source of free credit scores – of any type – that are updated on a daily basis. You can also get free FICO scores from a few select providers, including Discover.

Get Your Latest Credit Score – 100% Free Crowded Credit-Score Market

FICO is an easy-to-remember acronym, but it really doesn’t tell you much as far as credit scores are concerned. Each of us has as many as 49 different scores issued by the Fair Isaac Corporation, or FICO, among more than 1,000 scores overall. And guess what? In many cases, they won't exactly match what any lender uses to evaluate our trustworthiness as borrowers – or what some might call our “real” credit score.

That’s right. All major lenders use proprietary in-house credit scores, which might be based on over-the-counter scoring models but are modified in such a way as to provide drastically different results than anything we can get our hands on.

That, in turn, makes the brand and model of the credit score that you reference almost immaterial. It doesn’t matter whether it’s a FICO or VantageScore credit score or whether it’s based on your TransUnion, Equifax or Experian credit report. What matters is that you actually check your score. You should also get it for free from a reputable source and reference the same type of score over time for the sake of accurate comparison.

Ask The Experts: VantageScore 3.0 vs. FICO Score 8/9

Credit scoring is a nuanced, often opaque business. In the interest of pulling back the curtain a bit, we asked credit-industry executives for their take on VantageScore 3.0, including how it compared to the newest FICO model. You can find their bios and responses to the following questions below.

• Which is better and why: VantageScore 3.0 or FICO Score 9?
• Which aspects of VantageScore 3.0 do you like most, relative to previous versions?
• What will FICO’s share of the credit-scoring market be five years from now?

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• Peter A. Karl III Professor of Taxation and Business Law at SUNY Polytechnic Institute
• Maria Loumioti Assistant Professor of Accounting in the Naveen Jindal School of Management at The University of Texas at Dallas
• Cliff A. Robb Associate Professor of Consumer Science and Faculty Director of Consumer Finance & Financial Planning in the School of Human Ecology at the University of Wisconsin-Madison

Peter A. Karl III Professor of Taxation and Business Law at SUNY Polytechnic Institute

Which is better and why: VantageScore 3.0 or FICO Score 9?

Regarding your inquiry about the use of Vantage score versus the FICO score, I believe that at this period of time, the FICO is considered to be the premier credit source used universally by most institutions and others. Whether Vantage will be able to capture more of a market five years from now is anyone’s guess.

Maria Loumioti Assistant Professor of Accounting in the Naveen Jindal School of Management at The University of Texas at Dallas

Which is better and why: VantageScore 3.0 or FICO Score 9?

Both standardized credit scoring methodologies include important improvements over the existing FICO score, by incorporating a wider set of information to estimate borrowers’ creditworthiness. Prior research has widely argued that excluding the magnitude of delinquencies, utilization “memory,” paid collections, rent payments and (perhaps most importantly) medical collections provides a distorted view of whether a borrower will end up paying back her debt. To that end, both Vantage 4.0 and FICO Score 9 provide substantial improvements. Their differences are subtle, but it seems that Vantage Score looks at a slightly larger set of data. Recent evidence suggests that it improves the predictability of borrowers’ credit quality over existing credit scoring methodologies. Since these credit scoring innovations are relatively new, more research is required on the benefits and costs of lenders using them.

Which aspects of VantageScore 3.0 do you like most, relative to previous versions?

Please see my answer above. I believe many creditworthy Americans were unreasonably penalized for high medical costs in the U.S. (which likely led to their being delinquent), for missing small payments or for just being credit-averse. In the same time, they were not immediately rewarded when making their payments on-time, as well as some economically significant payments were not even reflected on their credit score. Given this imbalance, borrowers started “gaming the system” by issuing many credit cards, taking on many loans, etc. None of these clearly indicates whether a borrower is creditworthy, and thus, the noise in existing standardized credit scoring methodologies has been increasing over time.

What will FICO’s share of the credit-scoring market be five years from now?

The inefficiencies in existing standardized credit scoring methodologies provide a low-hanging fruit for new players to enter the space. Thus, I believe FICO will stop being (almost) a monopoly. However, it is particularly important to note that whatever the improvements in assessing borrowers’ credit score, these methodologies are standardized and based on semi-public, quantitative information; loan officers with their local knowledge, access to private and qualitative (“soft”) information on their borrowers play the most important role in assessing credit risks. Loan officers should be looking for borrowers’ accountability, responsibility, character, personality and other soft data when making a credit decision, not just a standardized score.

Cliff A. Robb Associate Professor of Consumer Science and Faculty Director of Consumer Finance & Financial Planning in the School of Human Ecology at the University of Wisconsin-Madison

Which is better and why: VantageScore 3.0 or FICO Score 9?

As in many situations, I would have to say that it depends. Both scores are reliant on the same five criteria, so there is a lot of similarity between the two. I like that the Vantage 3.0 score is structured to be more inclusive, as those with a limited credit history can still have a score. "Credit invisibility" impacts a large number of consumers and there should certainly be efforts to enhance the methods of judging creditworthiness. Using a shorter time frame helps many younger consumers obtain credit identity, who might have to wait longer under the other scoring models. I would note that the FICO 9 does account for a new factor that is interesting, that being rent payments. This is a very positive step towards including more consumers, however, this is contingent upon the landlord reporting those payments to at least one credit rating agency, and I am not sure if that is a norm yet.

Which aspects of VantageScore 3.0 do you like most, relative to previous versions?

A big piece here is the alignment of the scoring scale (even though FICO and Vantage have differences own how they generate scores). Having the Vantage 3.0 mirroring the 300-850 scale of the FICO 9 makes it easier on consumers, and I am always supportive of greater clarity in financial markets.

What will FICO’s share of the credit-scoring market be five years from now?

If I knew that, I would probably invest more in individual stocks. This is really hard to say. The long-time presence of the FICO system certainly suggests that they will not be losing much share in the near future, but if more, younger consumers are reliant on Vantage early in their lives, that may cause a bit of a swing over the next decade or so. It should be interesting to watch.

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via Finance Xpress