VantageScore & FICO: How to Fix Both Credit Scores

Shoshanna Cohen  | 

Misconceptions abound when it comes to improving your credit score. You’ve probably heard basic advice such as that using credit cards is good, letting bills go to collections is bad, and that if you generally borrow and spend responsibly, your credit is probably fine. But you might be sabotaging your credit score without realizing it.

There are two major credit scores available: Your VantageScore and your FICO score. Much of the information people have about optimizing their credit is based on how FICO has traditionally calculated its scores.

But VantageScore uses different, more modern methods to determine scores, and FICO has modernized as well, so that behaviors that might have helped your credit in the past don’t always have the same effect today. Understanding how your financial behaviors affect your credit score is the first step in building a great one.

Mistake #1: Applying for Too Much Credit

Many people open new credit cards and request higher credit limits on their existing accounts under the assumption that having lots of credit available will boost their score. But what really affects your credit score is your credit utilization ratio. It’s good to use a relatively small amount of your available credit for each account, whether your limit is $500 or $5,000.

This means that opening new accounts or raising your credit limit doesn’t help you if you’re using a large portion of this new credit. Also, the type of credit inquiries that result from credit card applications, called hard inquiries, can hurt your credit score, so be mindful of how many you make.

Conversely, you might think that being responsible means paying off all your random mall store credit cards and closing those accounts to tidy up your debt profile. But don’t get hasty with the scissors just yet. Since credit is scored based on utilization as well as the age of the accounts (how long you’ve had them), old cards could actually be helping you out, especially if they have no or low balances.

Fix It

Don’t close your credit cards, but do pay them off in a timely manner. If at all possible, pay more than the required minimum amount every month. For instance, if your minimum payment is $20, pay $30. You’ll pay the credit card debt down faster, plus this habit in itself reflects well on your credit — especially the VantageScore, which looks more closely at payment habits and how frequently you only pay the minimum amount.

If you feel like having a lot of open credit cards makes it hard to keep your finances organized, choose one card that you will mainly use for new purchases, and pay off the others one by one. If you’re concerned that you’ll keep running up debts on the other cards, store them in a file with your other paperwork instead of in your wallet—or just get rid of the physical cards—so it’s easier not to use them.

Mistake #2: Not Paying Bills On Time

When you’re balancing living expenses, debt payments, and unexpected emergency costs, it’s easy to put off paying your bills. If the electric company will keep sending you the same bill for a few months before it comes on red paper, but your credit card company will charge you $25 for every late payment, you pay the credit card and ignore the electric bill for now, right? Wrong. It’s important to pay your utilities too.

Many people mistakenly believe that only bills that have been transferred to collections can lower your credit score. But in fact, any late payment that is more than 30 days overdue can begin to affect your credit score, long before collections are ever involved.

The good news is that while late payments can lower your credit score, on-time payments can help you out. In the past, on-time payments of utility bills didn’t raise your credit, but VantageScore and FICO XD are changing that. These scores use utility bills like electricity and internet to predict credit behavior for individuals who don’t have much credit history. By paying your bills on time, you’re showing that you’re organized and can keep your financial commitments, just like with a credit card.

Fix It

Make it a priority to pay bills on time, and not just according to the risks of interest or late payment fees. If it always seems like a struggle, take a look at your budget to see where you can make some room. If, on the other hand, you have enough to cover the bills but they just seem to fall through the cracks, set up automatic payments. You should still keep track of which bills are coming and when so you can make sure to have enough in your account, but this way you can’t forget to pay them.

Mistake #3: Not Paying Attention to Your Credit Score

Perhaps the most avoidable mistake people make in regards to their credit score is simply ignoring it. But paying attention can help you root out factors that negatively impact your score that aren’t your fault. Once you get a read on what’s going on with your credit, you can take steps to fix it.

One of the most impactful things your credit report can reveal is fraud. You can find out if someone is taking out new credit cards in your name, and other markers of identity theft that can ruin your credit. It can also show other types of credit card fraud that might otherwise have flown under the radar.

Surprisingly, even unintended errors can be as big of a problem for your credit as fraud. Sometimes data is simply reported incorrectly by the credit bureaus, which can harm your credit. Luckily these errors can be reversed, but only if you catch them.

Fix It

If you stay on top of your credit, there won’t be any surprises when you really need it. As personal finance expert Kelley C. Long explains on her blog (which is a great resource), knowing your credit score is an important part of having your ducks in a row when you’re ready to take out a mortgage. You don’t want to find the perfect house, only to realize you have financial issues you need to resolve before you can qualify for the mortgage you need. Especially in competitive markets, it pays to do it ahead of time.

Get in the habit of regularly checking your VantageScore, which is easy and free for consumers to do. If you happen to be targeted by identity thieves or any other form of fraud, you’ll be able to catch it here sooner. This type of soft inquiry won’t hurt your score, unlike applying for credit cards. Look into the reason codes that VantageScore provides to understand what’s going on and how to make it better.

The factors that affect your credit may seem confusing, but if you keep a few simple tenets in mind you can stay on the right road. Be strategic about your credit cards, pay your bills on time, and pay attention to your score, and you’ll have the bases covered.


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Shoshanna Cohen is a writer based in Boise, Idaho. Her interests include health, fitness, finance, and culture.

This post was updated August 15, 2017. It was originally published July 28, 2017.