Financial IQ March 06 2018

What's the Difference Between FICO and VantageScore?

When you fill out a loan application, the lender will pull your credit to determine whether they should lend you money or not depending on your credit score. The score you receive will most likely come from FICO or their competitor VantageScore. So are these two credit scores the same? Not exactly.

FICO

The majority of lenders rely on credit score results from the Fair Isaac Corporation (FICO). FICO pulls credit information from the three big credit bureaus: Experian, Equifax, and TransUnion. FICO then uses this information to assess your creditworthiness and assign a score between 300 and 850. A FICO score breaks down into five categories, which in general receive the following weights in the calculations:

Payment history (35%)

The number one thing lenders want to know about your credit is whether you’ve paid the bills on your credit accounts and whether you’ve made those payments on time. Missed and late payments will hurt your score, but consistently making payments on time will keep your score high.

Amounts owed (30%)

Owing money won’t hurt your score, but excessive amounts of debt could lower it.

Length of credit history (15%)

Generally speaking, FICO will reward credit users with a longer credit history with a higher score. This score looks at the age of all of your credit accounts, and how long it’s been since you used each of those accounts. Having a short credit history will not necessarily cause you to have a low score—if you rate well in all other categories, that is.

Credit mix (10%)

This is where having a range of different kinds of credit, such as credit cards, retail accounts, and installment loans, will benefit your credit score. Don’t get too crazy though; having too many credit accounts can damage your score.

New credit (10%)

Opening several accounts in a short period of time will hurt your score, especially if your credit history is on the shorter side. Signal to lenders that you’re not a credit risk by pacing the opening of new credit accounts. A FICO credit score will always take each of these five categories into account, but the exact weights will vary depending on a given person’s financial situation.

Your FICO score may be a key piece of the puzzle.

Find out why!

VantageScore

VantageScore uses credit data from Experian, Equifax, and TransUnion to designate a credit score between 300 and 850. The main difference is the type of data used to determine a score, and how the credit information is weighted. Here are a few areas where VantageScore’s calculations differ from FICO:

Credit history

VantageScore requires only a month of credit history, as opposed to the six months required by FICO. VantageScore will typically give higher scores than FICO to people with short credit history.

Late payments

VantageScore penalizes late mortgage payments more than any other kind of late payment, whereas FICO treats all late credit payments equally.

Collection accounts

VantageScore ignores any collection accounts once they have been paid off, while FICO only ignores collection accounts if their original balance was less than $100. Evaluate these criteria and compare them to your own financial situation. You might get a better credit score from either one of the scoring authorities.  

Improve Your Credit

Follow these guidelines to improve your FICO and VantageScore credit scores:

  • Pay off your credit accounts on time
  • Keep your credit balances lower than 30% of your credit limit
  • Only open new credit accounts when you really need them

 

Need help with your credit? Learn how our Home Buyer Solutions Group can help!

Speak to a Credit Specialist

    Sources: www.myfico.com www.vantagescore.com www.money.usnews.com

Search Results for query

December 17 2018

FHA Announces New Loan Limits for 2019

The Federal Housing Administration (FHA) has announced their new loan limits—and it looks like it’s another increase in 2019!

Read More

December 13 2018

Student Loan Debt? How You Can Still Get A Mortgage.

While your student loan debt may look like the biggest obstacle getting in the way of homeownership, a lender may not see it as much of a threat. Here are what lenders are looking at and how your student loan debt affects your approval.

Read More

November 15 2018

The Impact of Rising Rates

If you’ve ever had a credit card or purchased a car, you should be familiar with interest rates. An interest rate is the percentage of the amount you are borrowing (known as the principle) charged by the lender as a fee for allowing you to use their money....

Read More

November 12 2018

What to Keep From Your Closing

After several stressful months of buying or selling your home, it may be tempting to put the transaction in the past and dispose of the evidence—which is often more than 100 pages. However, there are several important legal and financial documents...

Read More

November 05 2018

What is an Appraised Value?

Everyone wants to sell their house for more than they bought it for, but real estate is trickier than that. Markets change, and home values change right along with them. Fortunately, there are licensed professionals called appraisers who will come to your home,...

Read More

November 02 2018

Pros and Cons of Buying a Condo

Whether you are a first-time homebuyer or searching for home number ten, buying a condo instead of a house may be the perfect choice. Most condos are essentially a hybrid between an apartment and a single-family home. They are great for certain lifestyles but...

Read More

October 29 2018

What a Home Inspection Should Cover

Before making what may be the largest investment of your life, you’ll want to get a home inspection. Home inspectors are trained to examine the physical structures and systems of a house. If you’re going to spend hundreds of thousands of your...

Read More

October 26 2018

5 Reasons to Invest in Real Estate

Increasingly, Americans are choosing to invest in real estate instead of stocks, bonds, or mutual funds. From 2000 to 2016, real estate outperformed the stock market at a ratio of about 2-to-1. For three years in a row, Bankrate found more U.S. adults feel...

Read More

October 22 2018

What Does a Realtor Do?

Ever wonder about the difference between a real estate agent and a realtor? They’re the same, right? Not so. Working with a real estate agent can take a lot of time and stress out of the home buying process, but not all real estate agents are the same....

Read More

12345Last

Mortgage Calculators

Crunch the Numbers With Our Helpful Mortgage Calculators

Payment Calculator

payment calculator

Payment
Calculator

Affordability Calculator

affordability calculator

Affordability
Calculator

Refinance Calculator

refinance calculator

Refinance
Calculator

The Modern Digital Mortgage with a Personal Touch

Paperless. Effortless. Awesomeness TM

Simplify the home financing process with our Digital Mortgage. We'll be here to help navigate you through the entire process.

Get Pre-qualifiedWhat is a Digital Mortgage?