Why Do Some Online Lenders Use the Vantage Score Versus a Fico Score

VantageScore is created by the 3 credit bureaus including Equifax, Experian and TransUnion whereas FICO score is created by Fair Isaac Cooporation. Both Vantage score and FICO score are scoring models that creditors use to determine the creditworthiness of the borrowers. FICO score is the more popular scoring model and it is used by 90% of creditors. VantageScore, on the other hand, is starting to gain popularity and it was recorded that VantageScore has been used for over 6 billion times from the middle of 2014 to the middle of 2015.

The website of VantageScore claims that its scoring is used by large financial institutions, credit card companies, auto loan creditors and mortgage lenders. Only 7 of the top 10 major financial institutions use VantageScore so it is clear that FICO score is more popular. One reason why some online lenders are using Vantage Score is that they want to give opportunities to borrowers with lesser credit history to get a loan.

You only need to have a credit history of at least one month to generate your VantageScore credit report. Traditional model like FICO score requires the borrowers to have at least 6 months of credit history in order to generate the credit score report. Most lenders will not approve loans for borrowers who seldom apply for loans or those who are new to applying for loans.

The main difference between a FICO and Vantage Score is that the different information used in computing the score. FICO score is computed based on 5 components with the payment history and amounts owed being the major components. The other 3 components of FICO Score are the length of credit history, new credit and credit mix. VantageScore has 6 computing factors with payment history, credit type, the age of account, depth of credit and utilization being the largest component. The rest of the small components that influence the VantageScore are balances, recent credit inquiries, and available credit.

The two scoring models have the same credit score rating that ranges from 300 – 850. For Vantage score, a credit score rating in between 690 – 720 is considered good and above 720 is considered excellent. For FICO score, the credit score in between 740 – 799 is good and 800 or above is considered an excellent rating. Even though both have same scoring range, it is hard to perform comparison as they weigh on different components. Converting the score from one model to another will produce an unreliable result.

You no longer have to request a free FICO score report from the credit bureau. Many credit card companies and online lenders now give borrowers access to free FICO score. You can get your free VantageScore from sites like Credit karma and Quizzle.