There are a plethora of methods to calculate credit scores these days, specific to each industry and even the individual. Ninety percent of lenders currently rely on the FICO algorithm, but there’s a new kid on the block, VantageScore. These are broad scores used by lenders based on several factors (delineated below).

There are also scores used by particular industries to determine how much they’re going to charge you for their services, the most common one being the insurance industry.

Here’s a brief comparison of the two leading contenders for the business of determining your credit score. There are numerous models, factors and ways of looking at your creditworthiness but below are two of the most important.

Both VantageScore and FICO now score you from 300 - 850. Less than 600 is considered a poor score. Over 740 is excellent.

FICO

Started in 1989, FICO has a long track record. There are over fifty versions of your FICO score, depending on who’s asking and what their industry is.

The most recent update of the FICO algorithm, FICO 9, lessens the weight of unpaid medical bills.

Calculation methods:

• 35% Payment History. Have you been on time with your payments every month?
• 30% Credit Utilization. What percent of your maximum total credit have you borrowed? For example, if your mortgage, car and credit cards add up to $250,000, and you have paid back $125,000 of that through paying on your mortgage, car, and card payments, you’re at 50%. You want to be below 30% for the best credit score.
• 15% Credit History. How long have to been regularly paying on these accounts? Long steady history obviously will make you look like a better risk.
• 10% Types of Credit. Do you have a house mortgage, a car payment, a bank loan, and credit cards? Or just a bunch of credit cards and student loans?
• 10% New Credit. How much of your credit is less than two years old? One year?

Special considerations about this model: FICO only examines the most recent-reported billing cycle for things like credit utilization. So paying off a credit card thirty days before applying for a housing loan will give a different picture to FICO than VantageScore which uses trended data.

VantageScore

VantageScore was a joint effort by the big three credit reporting agencies Experian, Equifax and TransUnion.

Calculation Method:

• 40% Payment History. Payment history negatives (including bankruptcy) remain for seven years.
• 20% Credit Utilization. Less weight than the FICO model.
• 21% Age and Type of Credit. These are combined under a single model which is four percent less than the two categories which total 25% under FICO
• 5% Recent Behavior. Payments in the last billing cycle are examined, and this is the category where newly opened accounts and the number of inquiries are.
• 3% Available Credit. The total amount of credit available.

Special Considerations about this model: VantageScore ignores collections amounts under $250. This model also offers relief for those affected by natural disasters.

The most important consideration about VantageScore is the use of Trended Data, which creates a picture of the borrower over time in more detail.

Final Fun Fact: two out of nineteen free credit reports give you your VantageScore.

If managing all of this on your own is too overwhelming, contact a credit repair company to help you out. You can download our Free Guide to Finding the Best Dallas Credit Repair company to help you choose the right fit for you.