Your financial management is much influenced by a credit score, which is a number. It also determines if you are fit for credit cards, credit loans, mortgages, and other credit facilities. It also figures the interest rates you will be charged. This is why one should be conversant and informed about credit ratings and their changes.
The two most often used methods to see credit scores are FICO and CreditWise. Which one, however, assigns the correct mark? One should be aware of certain variations between these credit scoring methods, however.
What is FICO?
The business developing the FICO credit rating system is FICO. From the lowest of 300 to the highest of 850, FICO scores range. In this situation, the greater the score the more Over 90% of credit decisions made throughout the country rely on FICO ratings.
The lenders use the FICO score to decide whether or not to accept a new credit application you submit. Therefore, the FICO score offers you the most realistic view of your credit situation as seen by lenders.
FICO Score 8 is the FICO scoring methodology regarded as the most recent. Having said that, some lenders might still depend on the outdated FICO Score 4 or 5 models.
What is CreditWise?
CreditWise is a free service of Capital One, a credit monitoring product. You can track your VantageScore credit score generated by TransUnion with the help of CreditWise.
FICO has a formidable competitor in the market in the form of VantageScore. Similar to FICO, VantageScore assigns borrowers scores ranging from 300 to 850.
It is crucial to note that CreditWise employs a VantageScore and not a FICO score The key point to note is that CreditWise employs a VantageScore and not FICScores. It also means that the scores between the two models can be quite dissimilar.
These differences can be summarized by following key differences in scoring models:
There are a few important differences between the FICO and VantageScore models: There are a few important differences between the FICO and VantageScore models:
Scoring Factors The primary difference between FICO and VantageScore is that both use data from a credit report to generate scores but assign them to categories of data.
For example, FICO has defined that your payment history is the most crucial factor and it respects it by granting 35% of the score. By comparison, payment history has a 30% impact on VantageScore.
However, VantageScore is slightly different from FICO in that it places higher weight on credit utilization ratio and balances.
Data Sources FICO and VantageScore also utilize credit data from different sources. These FICO scores are computed with data from the credit reports of Experian, Equifax, and TransUnion. However, VantageScore relies on the data from TransUnion and Equifax only.
Scoring Ranges How they are developed also varies; the scoring ranges of the models are distinct. FICO has more rigid standards for what is considered an excellent credit score than VantageScore.
From FICO 8, you require a score of 800 and above for you to be classified under excellent credit. However, with VantageScore 4. 0, you only require 781 or a higher score.
So, Which of Them Is More Accurate?
The short answer is that it is FICO scores that provide the most accurate information about your credit condition. More than 90% of lenders use FICO scores to make decisions, which makes it the closest indication of your eligibility.
Also, FICO has access to another credit bureau not used by VantageScore. This gives FICO a better picture of your creditworthiness as a consumer.
So, there might be some argument about VantageScore's position in the credit industry but it is still an influential player. A growing tendency is observed within the current year when more and more lenders begin to approve credit scores based on VantageScores parallel to FICO scores.
And in some cases, VantageScore can get you better loan terms even if your FICO score is lower.
How to Check Your Scores
Both FICO and VantageScore models are equally accurate in painting a complete picture of your credit situation. Here are some ways to access your scores:
FICO Scores You can obtain your FICO score from myFICO. com or FICO. com with no hassle. That is based on the information that will be obtained from TransUnion and you will receive your FICO 8 score. It is also important to note that checking all three credit bureaus attracts extra charges.
Most credit card companies also offer free FICO scores with your monthly statement. Or you can obtain a FICO 8 from free sites such as Experian, Discover, or Chase Credit Journey.
VantageScores The simplest way of checking a VantageScore is in CreditWise as it offers the practice score for free. You can also buy a VantageScore from Experian. com or Credit. com Though the FICO score is the most popular credit score, the VantageScore is used by some creditors for credit decisions. However, it is not as easy to get as FICO.
In conclusion, it can be said that both, FICO and VantageScore hold importance for consumers. However, FICO is still currently the most commonly recognized score employed by lenders. So, it is highly advisable to track your reports from all three credit bureaus using myFICO or other sites such as Credit Karma. This will help you get a picture of how creditors view as well as score your creditworthiness.
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