What Is a VantageScore & a FICO Score?

A VantageScore and a FICO score are two different types of credit scores that indicate how responsible a person is with credit. These scores are important as lenders and others use the scores to make various financial decisions regarding a consumer. While the VantageScore and FICO scores are similar, they are not identical. Each score uses different scoring methods and its own range of scores.

Fico Score

The FICO score has been in use longer than the VantageScore and most lenders still use this score. The FICO score comes from the Fair Isaac Company and uses a scoring system from 300 to 850. To qualify for the best mortgage loan products, many lenders require a score of 740. To determine the FICO score, the Fair Isaac Company looks at five different factors: payment history, amounts owed, length of credit history, types of credit used and new credit. Of these factors, payment history and amounts owed are by far the most important, representing 35 percent and 30 percent of the total score, respectively.

VantageScore

The VantageScore is a newer form of credit scoring developed by the three major credit reporting agencies: Experian, TransUnion and Equifax. The VantageScore runs from 501 to 990, which also translates into a letter grade. A VantageScore in the 500s is an F, in the 600s is a D, in the 700s is a C, in the 800s is a B and from 900 to 990 is an A which is the best. The VantageScore looks at six different factors when creating a score: payment history, utilization, balances, depth of credit, recent credit and available credit. The VantageScore's most important factors are payment history and utilization, which represent 32 percent and 23 percent of the total score, respectively.

Score Importance

Both the VantageScore and the FICO score are important to consumers. Banks and credit unions use these scores to determine whether or not to offer a consumer mortgage or auto loans, credit cards and other loan products. In addition to simply approving or denying a loan, lenders offer more favorable loan terms to those with better scores. In addition to lenders, some insurance companies and employers use these scores to set rates for insurance products or determine whether or not to make a job offer to an applicant.

Improving Scores

While the FICO and VantageScore use different factors to determine a person's credit score, the formulas are close enough to allow consumers to take steps that will result in increases in both scores. As each score weighs payment history as the most important factor, this area is where a consumer should concentrate to improve her credit score the most. Paying down debt is also important as it reduces the total amount owed and increases available credit, which will also increase both credit scores.