FICO vs. VantageScore: The Credit Score Rivalry Heats Up

Published

January 30, 2015

Bob Sullivan is author of the New York Times best-sellers Gotcha Capitalism and Stop Getting Ripped Off. His stories have appeared in The New York Times, the Wall Street Journal, and hundreds of other publications. He has appeared as a consumer advocate and technology expert numerous times on NBC's TODAY show, NBC Nightly News, CNBC, NPR's Marketplace, Terry Gross' Fresh Air, and various other radio and TV outlets. He helped start MSNBC.com and wrote there for nearly 20 years, most of it penning the consumer advocacy column The Red Tape Chronicles. See more at www.bobsullivan.net. Follow Bob Sullivan on Facebook or Twitter.

VantageScore is making headway into the credit score market dominated by FICO, says the firm behind the upstart measure of credit-worthiness.

Nearly one billion VantageScores were generated in 2014 — a 600% increase — says VantageScore Solutions LLC, a creation of the nation’s three credit bureaus. The number of banks using the scores increased by 24%.

The VantageScore was created in 2006 by Equifax, Experian and TransUnion as a competitor to the FICO score. The FICO score uses credit bureau data, but was invented and controlled by Fair Isaac Corporation, a separate firm.

FICO remains the industry standard. FICO scores are used in “more than 90% of lending decisions,” and by 90 of the top 100 largest U.S. financial institutions, FICO says on its website. FICO sold just under 11 billion scores during fiscal year 2014, according to spokesman Jeffrey Scott.

“To the extent that VantageScore is gaining traction, it’s not at FICO’s expense. We are not aware of any significant bank or lending institution that’s replacing FICO with VantageScore” Scott said. “We have not seen any erosion in FICO (sales). The score business is growing nicely.”

Both VantageScores and FICO scores are now widely available to consumers. The latest version of the VantageScore (VantageScore 3) can be obtained for free every month on Credit.com. More recently, several credit card issuers have begun offering FICO scores to account holders.

Barrett Burns, president and CEO of VantageScore Solutions LLC, says it’s good to have multiple sources for credit scores.

“With this surge in market adoption, the consumer finance industry, including the largest banks in the country, clearly have voted for choice in the marketplace and are taking advantage of the transformative differentiators offered by the VantageScore model,” Burns said.

VantageScore says its scores use a broader set of criteria that allows an additional 30-35 million consumers to be scored, giving that group better access to America’s credit system.

“Among those consumers conventionally unscoreable, 10 million are attractive loan candidates, with scores of 600 and above on the VantageScore 3.0 scale range of 300-850,” the firm says.

One of the most common credit score misconceptions is that you have only one score; in reality, you have several dozen credit scores. Consumers in fact have multiple FICO scores, which can vary based on which credit bureau is used to supply the data used in the scoring formula. In additional, many financial institutions make adjustments to scoring formulas so they are more specific to their credit business. For example, an auto lender might more heavily weight auto payment history.

For a consumer who is monitoring their credit scores to check their progress as they build or rebuild credit, it’s helpful to compare the same score over time for consistency. You should also review your credit report from each of the three major credit reporting agencies, since the data in your credit reports are what your credit scores are based on. You can get your credit reports for free once a year under federal law.