Assessing risk and creditworthiness in business often includes assessing consumer credit scores. But when it comes to credit evaluations, not all scoring models are created equal. Whether you’re a consumer – or a professional who depends on the benefits of a thorough background check – it can help to understand the differences between FICO and VantageScore.

FICO (developed by Fair Isaac Corporation) has been around since 1956. It’s the credit score model used in more than 90% of loan-making decisions. VantageScore arrived on the scene in 2006, and is the joint brainchild of the three major US consumer reporting agencies (CRAs): Equifax, Experian, and TransUnion.

To provide you with the most relevant credit information possible, background check solutions like Inforex take advantage of both FICO and VantageScore. The same credit behaviors influence the two platforms, which means that they share certain traits. Some of these include:

  • a credit score scale that ranges from 300-850,
  • the leveraging of consumer information obtained from the nation’s three main CRAs, and
  • a scoring system where the higher the rating, the better the credit and lower the risk (a score exceeding 750 is considered excellent, whereas one below 640 may be considered “subprime” by lenders)

But because they measure credit report information slightly differently, scores can vary between FICO and VantageScore. Unique algorithms – and differing techniques for weighing certain data – are largely responsible for this.

One of These Things is Not Like the Other

Both VantageScore 3.0 and the latest version of FICO (FICO 9) ignore data involving paid collections and take rental payment histories into account. Both can also help you determine how likely an individual is to default on a loan or avoid paying their monthly rent.

FICO scores, however, are based on evaluating each of the CRA’s credit reports separately. FICO also offers industry-specific scores that include Auto, Mortgage, and Personal Finance. VantageScore, on the other hand, combines all three CRA reports into a single evaluative formula.

Not only does VantageScore weigh late mortgage payments more heavily than other late payments, it also makes allowances for consumers affected by natural disasters. But the biggest difference between the two models is that VantageScore can often provide a credit score for consumers who have a limited – or non-existent – credit history. It does this partly by taking alternative data like recurring bill payments into account and by factoring in credit activity from as far back as two years.

VantageScore plans to release its latest version 4.0 commercially later this year. Some of the most notable changes the developers claim to have implemented include:

  • a reduction in the importance of public records like tax liens,
  • less weight assigned to medical collection accounts, and
  • a more advanced approach to analyzing individual credit data trends

FICO, meanwhile, is attempting to keep pace with VantageScore by offering a new tool known as FICO XD. Geared mainly toward credit card issuers, FICO XD can provide formerly “credit invisible” individuals with a financial footprint. By looking at data like cell phone, cable television, and utility payments, this alternative scoring system is working to facilitate credit card approvals that often serve as the first step toward official credit score status.