Why are there different types of credit scores?

You probably know that you should be checking your credit score on a regular basis—but which credit score should you check? Do you need to know both your FICO credit score and your VantageScore, or is checking one credit score enough? How are FICO and VantageScore different from each other, anyway—and why are there multiple types of credit scores in the first place?

Originally, there was just one credit scoring service, the FICO credit score, created in 1989. The three major credit bureaus (Equifax, Experian and TransUnion) developed VantageScore in 2006 as an alternative to the FICO score. Both FICO and VantageScore offer different types of credit scores depending on what kind of information lenders are requesting and which credit score model is being used.

What does this all mean for you and which credit scores should you be tracking? Let’s take a closer look at how credit scores work, the different types of credit scores and what you need to know about VantageScore versus FICO.

What is a credit score?

A credit score is a three-digit number that represents your creditworthiness. Lower credit scores indicate that you are more likely to be a credit risk, while higher credit scores indicate that you are more likely to be a responsible borrower.

Although there are different types of credit scores, the two main credit scoring models—FICO and VantageScore—use a 300-850 point credit scoring scale. Each credit score falls within a specific credit score range and helps lenders understand how you have used credit in the past and how you are likely to use credit in the future.

What are the main credit scoring models?

Most types of credit scores fall under two main scoring models: FICO and VantageScore. The differences between VantageScore vs. FICO are relatively minor, in the sense that a person with a good FICO score is likely to have a good VantageScore as well. Likewise, a person with a bad credit score under the FICO scoring model is probably going to have bad credit in the VantageScore model.

Here’s what you need to know about the different types of credit scores:

FICO model

The FICO credit score was first developed in 1989 by Fair, Isaac and Company (now called the Fair Isaac Corporation). According to MyFICO, over 90 percent of top lenders use FICO credit scores to make lending decisions.

FICO offers many different types of credit scores. If you are taking out an auto loan, for example, a lender might check your FICO Auto Score. If you are applying for a credit card, a lender might look at your FICO Bankcard Score. If you don’t have much of a credit history yet, you can sign up for UltraFICO to have your banking activity factored into your credit score.

FICO regularly updates its credit scoring models to reflect changes in the industry and provide a more nuanced perspective of an individual’s creditworthiness, although these models can take some time to roll out. FICO recently released the FICO Score 10 suite, for example—but the FICO Score 8 model is still the most widely-used FICO credit score.

The FICO credit score ranges:

• Exceptional: 800-850
• Very Good: 740-799
• Good: 670-739
• Fair: 580-669
• Poor: 300-579

VantageScore model

The VantageScore model was created in 2006 in a collaboration by the three major credit bureaus. Equifax, Experian and TransUnion created VantageScore as a way to provide an alternative to the FICO scoring model. Although VantageScore uses many of the same factors to determine your credit score, it weights these factors differently.

Under the FICO scoring model, for example, your payment history is the biggest factor affecting your credit score. Under the VantageScore model, your credit card balances and credit utilization ratio are the most influential factors in credit scoring.

Like FICO, VantageScore regularly updates its credit scoring models. The VantageScore 4.0 model, for example, became commercially available in 2017 and uses trended data to track changes in credit behavior over time. FICO’s Score 10 Suite also incorporates trended data into its credit scoring decisions—but VantageScore got there first.

The VantageScore credit score ranges:

• Excellent: 781-850
• Good: 661-780
• Fair: 601-660
• Poor: 500-600
• Very Poor: 300-499

Other credit score models

FICO and VantageScore aren’t the only two credit scoring models out there. Equifax, for example, has created its own credit scoring model—and unlike the 300-850 point scale used by the most popular FICO and VantageScore models, the Equifax model uses a 280-850 credit score scale.

Other credit score providers offer credit scores that might sound unique, but are actually based on the FICO or VantageScore models. When you check your TransUnion credit score, for example, you’re actually getting a credit score based on the VantageScore 3.0 model. The personal finance app Mint offers “free Mint credit scores,” but these are also based on the VantageScore model—Mint hasn’t created its own credit scoring system.

Check the fine print to learn whether your credit score provider is using FICO, VantageScore or some other kind of credit scoring model. If you’re looking for a free credit score, try to pick credit score providers that use FICO or VantageScore.

Why do you get different scores from different credit bureaus?

Sometimes, one credit bureau might give you a different VantageScore or FICO credit score than the other bureaus. If you make a large purchase that uses a significant percentage of your available credit, for example, your credit score is likely to drop until you pay off your high balance. But it might drop more quickly with one credit bureau than with the other two.

Why? Because each credit bureau is continually adding new information to your credit file—but the three credit bureaus don’t always receive the same information at the same time.

So if you check your Equifax credit score on the first week of the month, your Experian credit score on the second week of the month and your TransUnion credit score on the third week of the month, you might get slightly different scores depending on how your credit activity has changed over the past three weeks.

There’s one more reason why you might have different credit scores with different credit bureaus. If one of your credit reports contains an error, it could affect your credit score. Since millions of Americans have errors on their credit reports, it’s a good idea to review your credit reports with each bureau on a regular basis and dispute any incorrect information you find.

How credit scores are calculated

Credit scores are calculated by analyzing the information in your credit report and assigning a numerical value to the data. This three-digit number reflects your credit history and the way you use credit. It also lets lenders know whether you are likely to be a credit risk. If you have a history of on-time payments, for example, your credit score is likely to go up—but if you start missing credit card payments, your credit score is likely to go down.

Here’s how FICO and VantageScore credit scores are calculated. Note that FICO weights each attribute by a specific percentage, while VantageScore merely identifies which attributes have the most influence on your credit score.

How FICO calculates your credit score

• 35 percent—payment history
• 30 percent—amounts owed
• 15 percent—length of credit history
• 10 percent—credit mix
• 10 percent—new credit

How VantageScore calculates your credit score

• Extremely influential—total credit usage, balance and available credit
• Highly influential—credit mix and experience
• Moderately influential—payment history
• Less influential—age of credit history
• Less influential—new accounts

How to check your credit score

There are many different ways to check your credit score. Many banks and credit card issuers provide free credit scores to account holders, and apps like CreditWise® from Capital One and Discover® Credit Scorecard will let you check your credit score even if you don’t have a Capital One or Discover credit card.

You can also sign up for a credit monitoring service. These services not only give you updated credit score information, but also track your credit report for potential signs of identity theft. Some credit monitoring options are free, while others come with a monthly or annual subscription cost.

You might even be able to access your credit score through a budget tracking app. Mint, for example, offers users unlimited access to their VantageScore credit score.

Here are some of the best ways to check your credit score online: