By Kat Campise


5 Min. To Read

* Editorial Disclaimer

This post may contain references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. The content or opinions contained within this post come from third party journalists or members of the Editorial Team and are not supplied by any of our partners.

In the world of credit card scoring, many consumers aren’t aware that credit card lenders can utilize various credit scoring reports to determine your creditworthiness -- indeed, there are dozens of ways your score can be calculated.

While there isn’t exactly a “secret sauce” for the calculations, Vantage Scores and FICO Scores will often report different numbers within the 300 to 850 ratings. The importance of understanding which score a lender uses can mean the difference between obtaining a credit card (or any other type of loan) and being denied credit.

The Fair Isaac and Company (FICO) was founded in 1956 and, in 1989, rolled out the first all-purpose FICO score. Prior to 1989, each lender had their own internal system for giving the final say on whether or not to extend credit to individual applicants.

Since that time, there have been additions to the FICO scoring inventory. What does this mean? FICO offers different scoring products based on the lending industry.

Even though FICO 8 is still the most common scoring calculation used by the Big Three credit reporting agencies (Experian, TransUnion, and Equifax), FICO rolled out FICO Score 9 in 2016. However, credit card companies and other lenders aren’t required to use the new score. This means that decisions about your credit are made based on:

a. The reporting agency the lender chooses (e.g. one of the Big Three)

b. The scoring version used by the lender’s chosen reporting agency

Add to this that your credit report score may differ between the Big Three, and establishing a definitive meaning as to your “creditworthiness” becomes more convoluted. But, there is more to this increasingly complex mathematical matrix.

A new credit score calculation competitor entered the market in 2006: VantageScore. Experian, Equifax, and TransUnion collaborated to create a credit scoring system that rivals FICO and, for the time being, is used for 10% of the lending decision in the U.S.

Though both use the scoring range of 300 – 850, there are distinct variations between how the FICO and VantageScores are calculated:

● VantageScore does not incorporate paid or unpaid collections below $250 into the calculation

● Collections that have been paid in full aren’t incorporated into the FICO 9 credit scoring in terms of negatively impacting your credit score; this is true for any paid collections of any amount – however, this is true for FICO 9 and not necessarily true for FICO 8

● VantageScore can base the calculation on only one month of credit history and will search as far back as 24 months; however, FICO requires a minimum of 6 months of credit history and doesn’t search farther back than that minimum time span

● Collections for medical bills have less of a negative impact on your FICO score -- but, this is only for those lenders who use FICO 9; this is not true for FICO 8

● VantageScore classifies and weights different types of loans depending on whether they are student loans, auto loans, first mortgages, lines of credit, and home equity loans

● FICO has a different scoring calculation for the separate industries (as indicated in the graphic above), but if the lender chooses to use the general FICO score, then each of the loan types aren’t as granular as the single VantageScore calculates

Due to the variations in credit reporting and scoring, lenders may ask for proof of your income (yes, even for credit cards), the length of time you’ve been employed at your current job, and how long you’ve lived in your current home.

You should review both scores on a regular basis. Granted, FICO is the most widely used, and if you are paying a service to monitor your credit score, then the FICO score is the preferred choice.

At this time, the FICO score is the primary calculation that Fannie Mae and Freddie Mac require if you’re seeking a home loan through either of those government entities. So, if you’re considering the purchase of a home with the assistance of either institution, then focus on your FICO score.

In terms of credit scores, the VantageScore is provided when you receive a free credit score from one of the Big Three reporting agencies. Therefore, it’s more easily accessible and as it gains in popularity -- which according to it is increasing in industry usage -- you’ll want to make sure your score is being reported accurately.

Despite their differences, attaining an excellent credit score is essentially the same for both FICO and VantageScore:

● Pay your bills on time

● Keep revolving balances low

● Maintain a combination of account types (revolving credit and installment loans),

● Only open new accounts as needed

● Keep new credit inquiries to an absolute minimum

Fortunately, for now, there are only two major credit scoring calculations that consumers need to focus on. Keep in mind that both FICO and VantageScore continue to evolve and update how they calculate your score. However, the more you adhere to the essential components of excellent credit (as listed above), the more likely you’ll achieve a high score for both FICO and VantageScore.

Image Source:

Table of Contents