​Taking the temperature of credit scoring: Vantage is hot, FICO is not.

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For sixty years now, the name ‘FICO’ has been synonymous with credit scoring, as the Fair Isaac Corporation is the preeminent credit model in the field. But if we stop to take the credit scoring industry’s temperature now, we’ll find that FICO has been cooling of late – while a new competitor, VantageScore, is red hot.

Make no mistake about it; FICO is still dominates the credit scoring landscape. In fact, each year FICO sells 10 billion scores to lenders who are looking to screen loan applicants and those seeking new credit. A FICO spokeswoman reports that 90% of all consumer lending decisions use FICO scores, and FICO generated $207 million in revenue in 2015.

But since VantageScore was launched in 2007 as a joint effort by the three major credit bureaus, Experian, TransUnion, and Equifax, the second-largest credit scoring company in the industry has been coming on like gangbusters. In fact, VantageScore just bypassed the milestone of issuing its six billionth credit score for 2015– no small feat for a year’s work.

The precipitous rise of VantageScore’s popularity certainly got FICO’s attention. In 2010, FICO took them to court for a lawsuit that alleged VantageScore’s range of credit scores too closely imitated FICO’s 300-850 scoring model. But the suit was dismissed, and VantageScore has been growing in leaps and bounds ever since.

VantageScore is now used by about 2,000 lenders, including seven of the top 10 biggest financial institutions in the country. While FICO still claims that it serves 90 of the top 100 largest financial institutions in the U.S. (doing the math, we see that either one or both of them are probably overstating their market share!), if a you order your credit report directly from Equifax, Experian, or TransUnion, you’ll probably receive a Vantage report.

FICO and VantageScore have been playing a game of cat and mouse, both introducing innovations to their scoring models – and copying the other. For instance, VantageScore3, introduced in 2013, doesn’t penalize consumers for having collections accounts with zero balances and also minimizes the damage from past due medical debts. FICO answered with their own new scoring system last all, FICO 9, which does the same.

But for the most part, both scores usually function about the same, weighing payment history and credit utilization (debt versus available credit) heavily. When consumers pull both their FICO and Vantage scores, they usually see they are very similar.

But there are some significant differences. FICO launched its XD scoring in October, which is the first to factor in alternative credit lines like cellphone and utility payment history.

FICO treats all late payments equally, while Vantage penalized late mortgage payments more than other accounts.

Hard inquiries from credit pulls are handled differently, too. While these don’t cause too much harm in either system, FICO accounts for a 45-day window for consumers to shop around for loans and have their credit pulled multiple times without a ding, while Vantage only allows a 14-day span. But Vantage allows that benefit for all types of loans and credit, while FICO only allows for mortgages, auto and student loans.

FICO scores range from 300 to 850, with a higher score indicating less risk and better management of credit, while Vantage scores traditionally range from 501 to 990. But even that gap is closing, with VantageScore3 releasing a score range of 300-850 – identical to FICO – as well as letter grades for credit worthiness from A to F.


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