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

November 07 2019

Home Organization Tips to Spark Joy

There is a proven correlation between home clutter and stress. Organizing your abode is a quick and relatively easy way to bring more joy (and extra time) to your life. Here are some home organization tips to help you spark joy!

Read More

October 30 2019

Find the Right Home Loan For You

There are several types of mortgage loans that fit various needs. Here is some information about some of the most popular products and why they might work for you.

Read More

October 24 2019

Reverse Mortgage Myths Debunked

As a senior, age 62 or older, a Reverse Mortgage enables you to tap into the equity of your home and benefit you financially today! The funds you receive can be used to eliminate your monthly mortgage payment, pay off debt, increase your monthly cash flow, or...

Read More

October 17 2019

What to Expect: The True Cost of Homeownership

Most soon-to-be homeowners are prepared to budget for their mortgage payment and down payment, but you should go into your dream of homeownership with a clear picture of all of the costs associated with this milestone.

Read More

October 09 2019

A Simpler Path to Homeownership with Credit Solutions

Interview with Credit Specialist, Sara Gellatly, to learn more about what HBSG is and how it helps real customers achieve their dream of homeownership. 

Read More

October 03 2019

Digital Mortgage 19

Digital Mortgage 19 took place from September 23-24 in Las Vegas. Three of our Executives had the honor of presenting at the conference.

Read More

September 24 2019

Understanding Your Loan Estimate

As part of your mortgage transaction, the Consumer Financial Protection Bureau (CFPB) requires that you receive a Loan Estimate at the beginning of your application process. You’ll receive a loan estimate within three days of submitting your mortgage...

Read More

September 20 2019

Eagle to Attend Digital Mortgage 2019 Conference

The Digital Mortgage conference features keynote speakers, panels, and live demos. Attendees will learn from top mortgage lenders, including Eagle Home Mortgage.

Read More

September 05 2019

What to Expect If Your Mortgage is Sold

Closing on a home only to find out your mortgage has been sold to another lender can be alarming yet is very routine in the mortgage industry. While it does not affect the terms of the loan, it is still best to prepare yourself for this common practice.

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?