Vantage Score vs FICO: Which Is Better? - Coast Tradelines
Are you trying to comprehend how your credit score is calculated? You may be overwhelmed by the number of scoring models available. However, two scoring models are notable. These are VantageScore and FICO. What is the difference between them in their performance, and which one is more reliable for assessing your creditworthiness? There are so many factors that can affect your financial future, the uncertainty of the two models could leave you wondering which one to focus on.
The anxiety finding out which score counts more could lead to confusion. Whether you're applying for the loan of a car or a credit card, the lenders could utilize different scoring methods. A poor score for one vehicle doesn't necessarily mean the same on the other. You may wonder whether these variations affect your chances of getting approved or getting a better rate.
This blog will go over the key differences of VantageScore and FICO. This will allow you to make an the right decision regarding your credit health. Additionally, we'll discuss strategies to help improve your credit score. Get ready to clear up the confusion. Control your credit score.
Understanding Credit Scores
Credit scores are numerical representations of an individual's creditworthiness. They play an essential role in financial decision-making. Landlords, lenders, and even employers often use these scores to assess the risk associated with the prospective borrower. Knowing the factors that create these scores is vital to those who want in the direction of improving their financial situation.
FICO Score
FICO is an abbreviation for Fair Isaac Corporation. It pioneered the field of credit scoring in the late 1950s. The FICO Score is a range of 300 to 850 and higher scores indicate greater risk to lenders. It has become the benchmark for lenders when assessing the risk of credit. The FICO model evaluates five major factors:
Payment History (35%)
It is the main FICO credit scoring criterion. It will determine if you've made your bills on time or have insufficient funds.
Credit Utilization Ratio(30%)
The credit utilization rate of your account shows how much credit you are using. Lenders and other financial institutions prefer a lower utilization ratio.
Length of Credit History (15%):
This factor is how long your credit account are active. A long credit history is ideal for credit scoring.
Types of Credit Used (10%)
A credit mix may enhance your score. Your credit mix could include mortgages, credit cards, along with installment loans.
New Credit (10%)
This factor examines the number of credit accounts have you opened. Also, it looks at the number of recent inquiries to your credit score.
VantageScore
These three credit bureaus created VantageScore in the year 2006. The joint ventures comprised Experian, Equifax, and TransUnion. They created this model to create a more inclusive system for credit scoring. VantageScore allows for a broader variety of credit scores for assessment. Like FICO, VantageScore ranges from 300 to 800. Although similar however, there are some notable differences in the way they determine scores.
Key Factors Influencing Vantage Score
VantageScore also evaluates your creditworthiness in light of several factors. As opposed to FICO, VantageScore weighs six components contributing to this rating model of credit. They are:
Payment History (40%)
VantageScore is a major focus on your payment history. This accounts for making payments in time, missing payments, and also the severity of delinquencies. A long-standing history of payments can result in a better score.
Age of Credit History (21%):
This is a factor that considers how long your credit accounts were in operation. A longer history of credit can improve your score. It can provide more information to lenders to assess your credit history over time.
Credit Utilization (20%)
VantageScore examines the proportion of credit you have available that your currently utilizing. The fact that this percentage is low suggests responsible credit management. For the best score, make sure you keep your credit utilization ratio lower than 30 percent.
Total Balances and Debt (11%)
This aspect examines the total amount of debt you have over all of your financial accounts. The lower amount of outstanding debt is more advantageous to lenders.
Recent Credit Inquiries (5%)
This takes into account the amount of hard inquiries you will receive in the process of applying for new credit. Hard inquiries occur when a creditor checks your credit report during the application process.
Available Credit (3%)
This is the total amount of credit available to you across all of your accounts. More credit available (without over-use) can show lower risk of credit.
Key Differences Between VantageScore and FICO
VantageScore and FICO are designed to determine the probability of an individual's ability to pay back debt. They do have some major difference, and they are:
Types of Credit Scores
They both VantageScore and FICO offer different options for their credit scoring models. These models check your creditworthiness by analyzing various factors. However, they might consider these variables differently. VantageScore has several versions (e.g., VantageScore 3.0, 4.0), while FICO also offers a variety of versions, such as FICO 8 and FICO 9. The kinds of credit scores they offer are similar to each other however, the method they use to calculate them varies.
Major Credit Reporting Agencies
VantageScore and FICO base their scoring on the three credit reporting agencies. These agencies store and collect your credit history. Both scoring models make use of this information to calculate your score.
Credit Usage
One of the key factors for both models of scoring is the amount of credit you use. It is the proportion of the balance of your credit card to your credit limit. While both models are able to emphasize this aspect, VantageScore tends to place more emphasis on credit utilization than FICO. Additionally, VantageScore takes into account different types of credit information. It includes rent payment and utility bills. This can be beneficial to those who have restricted credit card use.
Wide Range of Credit Ratings
Both VantageScore and FICO employ a range of score for assessing credit. But, they categorize each individual differently. VantageScore provides a wider approach to evaluating credit ratings. It may score people with thin credit files more favorably than FICO. This flexibility could make VantageScore easier to access for those who are new to credit or have lower credit scores.
Credit Card Issuers and Lenders
The huge difference is how credit card issuers as well as other lenders make use of these credit scores. Both lenders and credit card issuers across the U.S. use FICO scores for important credit-related decisions. FICO is the industry standard. While, VantageScore is becoming more popular in marketing campaigns such as pre-approvals, decisions, and even those which involve people with low credit background.
Credit Decision s
Most lenders use FICO. However, VantageScore is often used for pre-screening or by lenders looking for the creditworthiness of individuals. These lenders may not need such a strict assessment.
Strategies for Improving Your Credit Score
Improving your credit score is a must for achieving financial health and accessing favorable lending conditions. Building a solid credit history takes time. That is why adopting specific methods can improve your credit score. They also aid in preventing poor credit scores from holding you back. Here are some strategies to boost your credit scores:
Regular Checking of Your Credit Report
The first step to improving your credit score is keeping track of the credit score on your report. It is essential to be aware of your credit score. Be sure to verify that the data on your credit report is accurate. Credit reporting agencies maintain your credit history and sometimes, errors can happen. By examining your report for mistakes, you can ensure the accuracy of your credit report. You can also dispute any mistakes that are affecting your score.
Paying Bills on Time
One of the biggest factors that affect scoring your credit is payment track record. Being punctual with your bills is a sign of good credit habits. Lenders look at this when assessing your reliability. Late payments can cause your score to drop. It is important to make sure you pay all deadlines. Automate payments for your credit card payments and other recurring bills. This will help you to ensure that you pay your credit card debts or other ones in time. Making sure you pay your expenses will help you build credit worthiness.
Becoming an Authorized User
One less well-known way to improve your credit score is to become an authorized user of an account of another's. When you are an authorized customer, you benefit from the credit history of the cardholder who is the primary one. You would like these benefits but without the burden of debt. If the user who is primary has an excellent payment history and has a low percentage of credit utilization, you will see an improvement in credit score by the association.
Before you can become an authorized user, it's essential to ensure the company that issued your credit card reports the account of the user who is primary to credit reporting agencies. This will ensure your credit score is benefited through this plan. This strategy is helpful for people with a bad credit score or with a weak credit background. It can help to improve your credit score by adding positive information to your credit report.
How to Become an Authorized User
Being an authorized user on the credit card of someone else is a simple procedure that can boost your credit scores. To begin you have to request the cardholder who is the primary user add your credit card to the account. This means you have to give your personal information to the credit card issuer. The primary cardholder will then contact the credit company that issued the card. Once the credit card is added, the credit reports will include the payment history of the cardholder and their credit usage. This can help improve your score.
There are also tradelines available when you don't have trusted family member or friend with a good credit score. There are a lot of reputable tradeline companies out there. One of the best companies can be found at Coast Tradelines. Our services allow you to purchase a space on any credit card with an outstanding payment history as well as the ability to have a large credit limit. It is important to purchase tradelines only from trustworthy businesses is essential to ensure you're not dealing with scams or accounts. Companies that are trusted, such as Coast Tradelines vet our accounts to assure that the lines we offer are from reliable credit card accounts that have been established and well-known.
(855) 795-2310
784 Columbus Ave. #7T New York, NY 10025