Heads Up, FICO: You’ve Got Company

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FICO is still the gold standard for credit scores, but this newer competitor is gaining traction and has some advantages.


A battle of the titans is shaping up in the world of credit-scoring. FICO, the big fish in the industry, is facing growing competition from a rival scoring system, VantageScore.

VantageScore is gaining

VantageScore was launched in 2006 by VantageScore Solutions, a joint effort of the three largest U.S. credit-reporting agencies, Experian, TransUnion and Equifax. Before that the 60-year-old FICO (previously called the Fair Isaac Corp.), inventor of credit-scoring, had the field pretty much to itself.

FICO still does dominate. Its scores are used in 90 percent of lending decisions in the United States, FICO says.

Increasingly, though, VantageScore is accepted too. Its use grew sixfold between 2012 and 2015, according to Yahoo Finance. “VantageScore is already being used for some auto loans, credit cards and mortgages, and is gaining wider acceptance,” NerdWallet says. And an impressive roster of government and industry databases has embraced VantageScore.


Both scoring models use data on individual consumers from credit reports, crunching it in proprietary mathematical models to calculate the odds a borrower will default and translating those odds into scores.

Into numerous scores, actually: Both VantageScore and FICO sell many score products to lenders and the finance industry. Some are specific to certain industries — mortgage lending, for example, or auto lending. In other cases, a lender may customize a score a bit to suit its needs.

Scores from FICO and VantageScore all range from 300 to 850 (although older versions of VantageScore used a range between 501 and 990). The higher your score, the better your credit.

Writes Yahoo Finance:

FICO dragged the VantageScore maker to court in an effort to stop it from using its signature 300-850 credit score range, but the company lost the suit in 2010. VantageScore has been gaining ground ever since.


Despite the similarities, each company’s approach and its recipes — the formulas used to create a score — differ, sometimes a good deal.

VantageScore 3.0, the latest version, produces scores for millions of consumers who did not previously have credit scores because their records contained too little information. Writes Credit.com:

While many other scoring models require at least six months of credit history and recent credit report updates, VantageScore only requires one month of credit history and less frequent updates. Credit can now be made available to consumers who are brand new to credit, those who only use credit occasionally and people who haven’t used credit at all recently.

You might think that less information means a consumer is a higher risk for default, but VantageScore says that’s not so because it beefs up these “thin” credit files with rental- and utility-payment histories, an approach not used in credit-scoring before.

Where VantageScore shines

Pulling information from utility bills and rent history lets VantageScore rate people who haven’t used credit much if at all. VantageScore claims that it can produce scores for 30 million to 35 million more consumers with this approach, adding that:

  • Roughly 10 million of those consumers have scores of 600 or higher, which makes them attractive prospects to many lenders

  • Approximately 9.7 million of the consumers who are newly scoreable with VantageScore 3.0 are African-American or Hispanic, and about 2.7 million of them have scores of 600 or higher.

One more difference: VantageScore ignores bills that went to collection but have been paid off. (More than half such collection actions involve medical debts, The New York Times reports.) FICO score products take points off for all collections, whether resolved or unpaid.

Rate-shopping windows vary

While you probably know this, when shopping for a loan it’s good to bunch your credit applications within a short period of time so multiple credit inquiries don’t lower your credit score.

The scoring companies recognize the need for comparison shopping and they count all inquiries made within certain time frames as one. With FICO, you get a 45-day window to show for loans. VantageScore, however, allows 14 days, says The New York Times.

The takeaway: If you worry about hurting your VantageScore credit score, get your comparison shopping for loans done within two weeks.

Monitor both scores

The decision about which score to use is up to businesses you deal with, not you. So it’s a good idea to watch both your FICO and VantageScore credit scores every now and then to make sure neither has taken a dive, which can be the sign of an error on your credit report. Here are the simple steps to take:

Watch for change

The two big U.S. mortgage investors, Freddie Mac and Fannie Mae, are examining the possibility of incorporating alternative credit scores into mortgage lending.

A bipartisan bill (H.R.4211, the Credit Score Competition Act of 2015) before the House of Representatives would let Freddie and Fannie use alternative credit-scoring models when choosing mortgages to buy, HousingWire reports. (Freddie and Fannie’s decisions shape the rules that consumers have to play by when applying for mortgage loans; Government gets a hand in these decisions because of its role in keeping credit available fairly.)

If the bill, or one like it, becomes law, it could help open homeownership to less-affluent consumers who pay their bills faithfully but can’t now qualify for mortgages because of low or nonexistent FICO scores.

What experiences do you have with FICO or alternative credit scores? Share with us in comments below or on our Facebook page.

Stacy Johnson

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