VantageScore Just Released a New Credit Scoring Model but FICO is Still King

VantageScore vs FICOVantageScore recently released a reimagined version of its credit-scoring model. Dubbed VantageScore 3.0, the model considered 900 data points and tested 50 different algorithms before deciding on the 3.0 model.

The result, according to the company, is a 25 percent predictive lift over previous models. Among the biggest changes, the scoring range now lines up with the FICO model in order to give customers a side-by-side comparison of their scores.

According to CNN, the new model departs from the traditional model of including all debts that went into collections in the calculation for seven years. Now, providing the account has a zero balance, it will not be included in the calculation.

Previous versions of VantageScore would ignore positive and negative entries following a natural disaster. This meant that even if a person exhibited positive credit behavior, they were unable to improve their score. 3.0 now considers positive activities while still ignoring the negative.

VantageScore 3.0 takes into account activities from two timeframes so consumers hit hard by the financial crisis don’t suffer such significant credit score damage. The two timeframes, 2009-2011 and 2010-2012 are blended, decreasing the weight placed on a single event.

Finally, the new algorithm allows for up to 30 million people with little or no credit history to receive a score. This got the attention of FICO which announced that it would develop a way to assign scores to those with limited credit files.

VantageScore vs FICO

These changes are significant, but the VantageScore and FICO models are similar. So similar, in fact that FICO sued VantageScore in 2010 claiming the childhood version of “you copied us!” FICO lost the battle, which paved the way for VantageScore to compete directly with FICO.

Just as FICO assigns the most weight to payment history, VantageScore does as well. 90 percent of those with a prime score pay all debts on time, according to the infographic pictured below. The second highest weighted item is the age and type of credit. FICO considers this the third most important metric.


VantageScore Infographic – Click to See All

Third, VantageScore weights credit utilization. Prime customers use 28 to 30 percent of their maximum credit, according to the company. FICO doesn’t list utilization as one of its main categories but it’s likely built into the “amount owed” section—the second highest weighted category for FICO.

Fourth is the total amount of reported balances that are current or delinquent. Fifth is recent credit behavior, which includes the number of recent credit inquiries and credit accounts, opened. This is roughly in line with FICO that gives this category a 10 percent weighting.

The least important to VantageScore is the amount of available credit. This is different from its utilization metric that measures the percentage of the available credit. FICO doesn’t include this as a category.

FICO publishes a pie chart that includes the weighting of each metric used to calculate the score but Jeff Richardson of Vantage score says that assigning actual percentage weights is misleading.

“The fact is, everyone’s credit file is different so there cannot be precise weightings. For example, if someone has not had any inquiries lately, the weightings in other categories would be different.”

FICO Still King

According to the VantageScore website, 7 of the top 10 financial institutions use its model, along with 6 of 10 credit card issuers, 4 of 10 auto lenders and 4 of 5 mortgage lenders. FICO’s website says,” 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.”

Other data show that the VantageScore 2.0 model was only able to capture 5.7 percent of the credit-scoring model. How can VantageScore claim that kind of reach while FICO makes claims that are similar?

Richardson says,

“Lenders—even ones that are relatively small, and certainly large lenders—use many different credit score models. They might use one for card issuance, another for auto, and another for portfolio monitoring.”


FICO is still the standard among lenders and personal finance experts but that doesn’t mean that VantageScore doesn’t have value. The best way to use VantageScore is to compare it to your FICO score. If the numbers are wildly different, investigate your credit reports closely. There may be inaccurate entries or fraudulent activity that is affecting one of the scores.

Gerrid Smith is CEO of the charity-focused coupon website, Save1. They provide coupons and deals from over 5,000 online stores! Each time a coupon is used, they provide a meal to a child in need. You can connect with Save1 on Twitter, Facebook and Google+.

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