The credit scoring companies FICO and VantageScore are used by lenders to determine if a borrower is creditworthy. Each company utilizes their own formulas for determining a consumers credit score.
HIstory
Fair Isaac Corporation (FICO) was established in 1989 with Equifax to create a scoring system to determine a borrowers likelihood of repaying debts. VantageScore is newer to the market and was introduced in 2006 to compete with FICO.
Purpose
Each company analyzes a borrowers credit history, amount of credit, type of credit and payment history to determine a score.
Score
FICO scores range from 300 to 850 points, while a VantageScore has a range of 501 to 990. Borrowers will want to achieve the highest possible number to receive the lowest interest rate.
VantageScore Calculations
Payment history is 32% of a VantageScore. The debt to credit ratio is 23% of the score, while 15% is the amount of credit being used and delinquent accounts. Thirteen percent of a score is an individuals length of credit history. Recently opened lines of credit make up 10% and lastly the amount of credit an individual can access is 7% of the score.
FICO Calculations
A borrowers payment history makes up 35% of the FICO score. Thirty percent is the amount owed while 15% is the length of credit history. New Credit and types of credit each make up 10% of the score.
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