Why it’s important to know both your FICO Scores and Vantage Scores
In this article, I discussed why it’s important to know both your FICO and Vantage scores, especially in Mortgage Lending decisions.
Some changes are on the horizon, so it’s best to equip yourself with this information, in order for bureaus and lenders not to take advantage of you.
In addition, I also went into a little rant as to why I have a love/hate relationship with Vantage.
Before you apply for a loan, there are important questions to ask a lender.
1) What credit bureau are you using?
2) What credit model are you using?
It is very important to ask these questions to your lender to know that you are getting the best possible deal.
1) Best interest rates
3) Getting the best deal
4) Lowest cost of money
That’s what really matters.
How will Vantage scores be used in mortgage lending decisions?
The newer scores are more forgiving of unpaid medical debt and accounts that went into collections but were eventually paid off.
They also consider rental payments, if available, which could add years of responsible payment history to the credit scores of many consumers.
As a result, this could boost some people’s credit scores. Estimates vary, but up to 3 million more people could qualify for a conventional mortgage, depending on the credit score used.
The change from FICO to Vantage is coming.
In the next 18-24 months or maybe sooner.
Why does that matter?
Mortgage lenders are currently using 3 versions of FICO.
1) Experian – FICO 2.0
2) Equifax – FICO 5.0
3) TransUnion – FICO 4.0 or FICO 5.0
These 3 models have been used since 2004.
It’s been like this because it works.
Above all, risk has been mitigated.
The older FICO score considers any paid-off collections negatively for the seven years that they remain on your credit report. By contrast, FICO Score 9 and VantageScore 3.0 ignore any collections accounts that have been paid in full by the consumer, even if they still show up on your credit report.
It has to do with the loosening of the guidelines for mortgage approval.
It is definite that Vantage Credit scoring may get some traction. CreditKarma.com uses the Vantage credit scoring system.
You need to know your credit scores. You need to know your credit numbers.
For mortgage lending decisions, it is important to know what score they’ll be judging you based off.
Lenders will choose to use VANTAGE or FICO.
Experian, EquiFax, TransUnion own Vantage.
Why? Because they are greedy.
I hate AND like the Vantage model.
It exists. It’s gaining market share.
But who owns it?
They claim to want to de-monopolize.
FICO is keeping up with the times.
Vantage doesn’t want to pay FICO so much.
Vantage wants to create their own algorithm to save more money.
Credit Bureaus are trying to become exempt from the credit rules.
Credit Repair Organization Act.
The bureau wants to get into the credit space but doesn’t want to play by the rules.
Consequently, the practices have done before stem from digging up the most negative information about a consumer.
The credit bureau makes so much money off whoever will buy it.
If you have bad credit, they will make more money off you.
Lenders get to claim a premium because of bad credit.
If you have bad credit, credit bureaus DO NOT want you to improve your credit score.
They want you to have bad credit.
Why would they help you? That would devalue yourself to them. They can’t sell your information as much.
So, why does the Vantage Credit change matter?
Therefore, it is imperative that before you apply for a loan or a line of credit.
1) Know what’s your own credit report
2) What model is used on your credit report
So, you know what you are doing. Not make a bad financial decision.
Knowing the data, model, and bureau being used is SUPER IMPORTANT.
The worst thing you can do is to be uneducated.
Simply because you did not know.
Only because you wanted to be approved.
Hence, not caring about the interest rates, the fees behind, or the best possible terms for you is something that will come back and bite you because you will lose money long term.
What score is being used?
Vantage is coming. The 3 bureaus own them.
You need to know your scores.
VantageScore 3.0 offers faster scoring.
Both FICO 5 and FICO Score 9 require at least one account to be open for six months before a credit score can be calculated. But VantageScore can calculate a score after an account has been opened for only one month.
This means that about 30 to 35 million people who otherwise wouldn’t have a FICO score receive a credit score under VantageScore, the company estimates.
Certainly, not all of these would qualify for a mortgage, says Jeff Richardson, spokesman for VantageScore.
The number is closer to 2 to 3 million who have the income necessary to support a mortgage in their area and a high enough credit score.
“We’re talking about those who have been credit inactive for longer than six months,” he says, noting that many of them had credit accounts before in good standing that they closed more than six months ago.
“There are a lot of creditworthy people in that segment that are being locked out of mortgages.”
Above all, know what’s in your report. Know your own data.
For that reason, this is an unfair playing field.
The company that created all the problems wants to charge to fix it.
The credit bureaus.
Bureaus do not want to follow the rules.
Due to, data compliance and data integrity.
Certainly, pay attention to your FICO. Pay attention to your score.
3) Phone numbers
Most noteworthy, be sure to remove outdated information as soon as possible.
As a result, it is recommend to get rid of that stuff.
You don’t want to run around with this info on your record.
Similarly, you don’t want the files to possibly get mixed up.
1) Do not dispute inquiries that result in a decrease in credit score.
2) Do not dispute Capital One inquiries.
Inquiry affect scores may remain on your record for up to 12 months.
Therefore, they’ll be on the report for up to 24 months.
It is definitely important to understand that
Lenders need PERMISSION to pull your credit report.