Change in How Credit Scores Are Calculated

The FICO score has long been the industry standard for determining the creditworthiness of potential borrowers. The VantageScore was developed from 2003 to 2005 by the three credit bureaus, Experian, Equifax and TransUnion, before being released to lenders. The FICO score is still the primary score that is used by lenders to determine whether you will receive credit. The VantageScore is still being used on an experimental basis to determine whether it should replace the FICO score as the industry standard.

Score Components

The FICO score bases your credit score on five factors, but the VantageScore uses six factors. Both formulas look at your payment history and how much credit you have recently applied for. The FICO score groups three of the VantageScore factors into one: the percentage of your credit that you are using, your outstanding balances and your amount of available credit are grouped into total amounts owed. The VantageScore groups two of the FICO score factors--how long you've had credit and the types of credit you have used--into one factor referred to as depth of credit.

Component Percentages

Though they use similar factors, the factors are weighted differently in FICO scores and VantageScores. For the FICO score, 35 percent is based on your payment history, 30 percent on the balances you owe, 15 percent on the length of your credit use, 10 percent on how much credit you've applied for recently and 10 percent on the mix of credit you've used. The VantageScore weights your payment history at 32 percent, your use of credit at 23 percent, your amounts owed at 15 percent, your depth of credit at 13 percent, your applications for new credit at 10 percent and your available credit at 7 percent.

Scoring Scale

Both FICO scores and VantageScores report your credit worthiness as a number. FICO scores range from 300 to 850, with 850 being the best credit score. VantageScores range from 501 to 990, with 990 being a perfect score. VantageScores also give a letter grade to each score. A score between 501 and 600 is an F, between 601 and 700 is a D, between 701 and 800 is a C, between 801 and 900 is a B and any score over 900 is an A.

Detailed Reports

VantageScores claim to be more detailed than FICO scores in terms of how negative information affects the score. According to Experian, the VantageScore takes into account not only whether the individual has negative credit information, but also how often that negative information occurs. For example, the VantageScore claims to differentiate between customers who have one or two negative reports from customers with a dozen or more negative reports.

Effects of VantageScore

The VantageScore was created to better judge the creditworthiness of people without lengthy credit histories. The FICO score reports that individuals who have less than six months of credit history or have not used credit in six months as being unable to be scored, resulting in those people usually not receiving loans even though they might be a low-risk borrower. The VantageScore extends the inactive period from six months to two years. The VantageScore is looked upon as a better predictor of creditworthiness for individuals with three or fewer credit accounts.