When it comes to securing a mortgage, your credit score plays a crucial role in determining your eligibility, interest rates, and loan terms. Two main credit scoring models are the Fair Isaac Corporation’s FICO Score and the VantageScore. Since their introduction, a battle has emerged in the world of credit score calculation and mortgage qualification. It’s essential to know the differences between these scoring systems and how they affect your mortgage prospects. To better understand the world of credit scoring, here’s a detailed comparison of FICO and VantageScore, their methodologies, and how they impact your chances of obtaining a favorable mortgage offer.

Table of Contents:

  1. Origins of FICO and VantageScore
  2. Calculation Methodologies
  3. Credit Score Ranges
  4. Differences in Mortgage Approval Process
  5. Improving Your Credit Score
  6. Choosing the Right Mortgage Option
  7. Frequently Asked Questions (FAQs)

1. Origins of FICO and VantageScore

FICO and VantageScore emerged to address different aspects of credit score calculation and interpretation for lenders and consumers. Each model has its unique history and development.

FICO Score

The FICO Score was created by the Fair Isaac Corporation in 1956. As the pioneer of credit scoring systems, FICO has become the industry standard, with over 90% of top lenders using FICO Scores to make lending decisions. FICO Scores are calculated using data from the three major credit bureaus: Experian, Equifax, and TransUnion. The latest versions of FICO Scores include FICO 10 and FICO 10T – the latter of which includes trended credit data, which places more emphasis on your overall credit history over a period of 24 months or so.


The VantageScore credit scoring model was introduced in 2006 as a competitor to FICO. It was developed collaboratively by the three major credit bureaus to address the lack of a consistent scoring methodology in the market. Since its launch, VantageScore has gained considerable traction among lenders, and its latest version, VantageScore 4.0, has further enhanced its predictive accuracy and consistency. It also uses trended data and VantageScore 4.0 scores millions of more people who  didn’t have a credit score because they lacked traditional credit data.

2. Calculation Methodologies

Both FICO and VantageScore use different methodologies for calculating credit scores, but they primarily consider similar factors: payment history, credit utilization ratio, length of credit history, types of credit, and recent inquiries. However, the weighting assigned to these factors differs between the two models.

FICO Score Calculation

  • Payment history (35%): Emphasizes the importance of timely payments on your credit obligations.
  • Credit utilization ratio (30%): The proportion of your available credit that you’re using at any given time.
  • Length of credit history (15%): Considers the age of your oldest account and the average age of all your accounts.
  • New credit (10%): Includes recent credit inquiries and new credit accounts.
  • Credit mix (10%): Assesses the diversity of credit types in your portfolio, such as credit cards, mortgages, and installment loans.

VantageScore Calculation

  • Payment history (40%): Prioritizes on-time payments for various credit types.
  • Credit utilization ratio (20%): Focuses on your overall credit usage compared to your available credit limit.
  • Length of credit history (21%): Factors in the age and usage of your accounts.
  • New credit (5%): Considers credit inquiries and new account openings.
  • Credit mix (11%): Takes into account the variety of credit types you manage.
  • Available credit (3%): Evaluates your accessible credit based on your credit limits.

3. Credit Score Ranges

Both FICO and VantageScore credit scores range from 300 to 850. However, the categorization of scores differs slightly between the two models:

FICO Score Ranges VantageScore Ranges
Exceptional: 800-850 Excellent: 781-850
Very Good: 740-799 Good: 661-780
Good: 670-739 Fair: 601-660
Fair: 580-669 Poor: 500-600
Very Poor: 300-579 Very Poor: 300-499

4. Differences in Mortgage Approval Process

Both FICO and VantageScore play a role in how mortgage lenders assess your creditworthiness. However, the mortgage approval process historically relied more heavily on FICO Scores. That’s changing because of new rules and guidelines in the mortgage industry, as well as changing lender preferences.

Role of FICO in Mortgage Approval

For decades, most mortgage lenders frequently used FICO Scores when they considered loan applications. Specifically, they used the middle score from the three major credit bureaus. For instance, if your Experian, Equifax, and TransUnion FICO Scores are 720, 740, and 760, the lender would consider the 740 FICO score for your mortgage application.

Role of VantageScore in Mortgage Approval

While VantageScore has gained traction among lenders for other types of credit decisions, mortgage lenders’ adoption had, in prior years, been slower. However, the increasing competitiveness of VantageScore 4.0 has led to more mortgage lenders considering it in the future. In 2022, lenders pulled more than 19 billion VantageScores — up 30% from 2021, as banks, fintech firms and other financial institutions looked to widen their customer base and their pool of potential borrowers.

Additionally, the Federal Housing Finance Agency (FHFA) in late 2022 announced the validation and approval of both the FICO 10T score model and the VantageScore 4.0 model for use by the mortgage giants Fannie Mae and Freddie Mac (known as GSEs, or Government Sponsored Enterprises).

As part of a new joint GSE Credit Score and Reports Initiative, the mortgage industry is now moving from the current Classic FICO credit score models to require lenders to use two credit scores generated by the FICO Score 10 T and the VantageScore 4.0 models. (For mortgage applications, most lenders have previously been using these “classic” FICO scores when they pull consumers’ credit reports: FICO Score 5 at Equifax, FICO Score 4 at TransUnion and FICO Score 2 at Experian).

Another new change: per FHFA guidelines, mortgage lenders will be required to pull two, rather than three, of your credit reports from the national consumer reporting agencies – moving from the current tri-merge report model to a bi-merge model.

5. Improving Your Credit Score

Whether your mortgage lender primarily relies on FICO or VantageScore, improving your credit score is essential for securing better mortgage rates and terms. Here are some tips to boost your credit score:

  1. Make timely payments on all credit obligations.
  2. Maintain a low credit utilization ratio by not maxing out your credit cards.
  3. Avoid closing old credit accounts, as it could negatively impact the length of your credit history.
  4. Limit the number of new credit applications to prevent hard inquiries from affecting your score.
  5. Maintain a diverse mix of credit types to demonstrate responsible credit management.
  6. Regularly review your credit report for errors and dispute inaccuracies with the credit bureaus.

6. Choosing the Right Mortgage Option

With a clearer understanding of your credit score, you can make informed decisions about your mortgage options. Consider the following tips when choosing the right mortgage plan:

  1. Compare multiple lenders to find the best interest rates and loan terms.
  2. Consider government-backed mortgage programs, such as FHA, VA, or USDA loans, which may offer more favorable terms for borrowers with lower credit scores.
  3. Opt for a fixed-rate mortgage to lock in a consistent interest rate throughout the loan term. Adjustable-rate mortgages may offer lower initial rates but could change over time.
  4. Evaluate your long-term financial goals and determine the ideal loan term – a 15-year mortgage will result in higher monthly payments but lower overall costs, while a 30-year mortgage offers more manageable payments but increased interest costs.
  5. Consider working with a mortgage broker who can provide personalized guidance and access to various lenders and loan programs.

7. Frequently Asked Questions (FAQs)

Which credit score is most important for a mortgage application?

The most important credit score for a mortgage application has historically been currently your FICO Score, as it was more widely used by mortgage lenders. Typically, lenders utilize the middle score from the three major credit bureaus when evaluating your application. But as explained above, both the FICO 10T and the VantageScore 4.0 credit scoring models are being given equal importance in the mortgage industry.

How much will my credit score affect my mortgage interest rate?

Your credit score heavily influences your mortgage interest rate. Higher credit scores usually result in lower interest rates, potentially saving you thousands of dollars over your mortgage’s life. Conversely, lower credit scores can lead to higher interest rates and increased borrowing costs.

Can I still get a mortgage with a lower credit score?

Yes, you can still qualify for a mortgage with a lower credit score, although your options, interest rates, and loan terms may be less favorable. Consider government-backed mortgage programs like FHA, VA, or USDA loans, which are designed to assist borrowers with lower credit scores.

How can I improve my credit score quickly before applying for a mortgage?

There are several strategies to improve your credit score quickly before applying for a mortgage. Focus on making all payments on time, paying down high credit card balances, and avoiding applying for new credit. Additionally, review your credit reports and address any inaccuracies with the credit bureaus.

Understanding the differences between the FICO and VantageScore credit scoring models and their impact on the mortgage approval process is essential in securing the best possible mortgage terms. By improving your credit score and evaluating different mortgage options, you can make well-informed decisions as a borrower and achieve your homeownership goals.

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