Vantage and Fico Score; what is the difference between how they are tabulated?

Fico was the first score created and is used by the majority of mortgage lenders when assessing the risk of a potential borrower. To compete with Fico, the Vantage score was created in 2006 by the credit bureaus; Trans Union, Equifax, and Experian. At this point the Vantage score is not widely used and a newer 3.0 Vantage score has been created as well.

The criteria the two scores use is slightly different:

FICO ranges from a 300 to 850 and is tabulated based on
• 35% payment history
• 30% debt
• 5% length of credit history
• 10% new credit
• 10% types of credit used

Vantage ranges from 501 to 990 with letter grades A-F. The newer Vantage score ranges from 300-850. The score is tabulated based on
• 30% recent credit
• 28% payment history
• 23% amount of credit limit used
• 9% age and type of credit
• 9% total of balances
• 1% available credit

Understanding the Vast Business of Scoring

Scoring thresholds for approvals and better rate offers on loans have become higher while lenders of all kinds depend on scores to evaluate and curb risk making it essential for all of us to understand who creates these scores, where they are offered, and what the variations are.

It is always important to note that there are many scores and each may have a different range. For example, if you pull a Fico score the range is 300-850 and anything above a 740 is excellent. If you pull a Vantage score the range is 501-990 and it has letter grades A-F. If your Vantage Score is a 740 it does not mean you have excellent credit.

Most consumers think all scores come from the bureaus which is also false. Fico created the first scores for lenders to evaluate risk. When banks found themselves getting sued for discrimination due to underwriters (bank employees) being the sole authority for rejecting applicants, the demand for a score to use as an indicator of risk became prevalent. This was a way for the focus to come off the banks when consumers were rejected. Fico is and always has been a separate company from Experian, Trans Union, and Equifax. The Fico scores used by lenders are scores created by Fico for the purpose of each bureau to sell to lenders. The bureaus use their Fico version score formula for lenders to evaluate the information the bureau compiled on a specific consumer in the form of a number. The lenders pay a fee to the bureau for this service. Equifax and the other bureaus pay Fico a royalty when using the Fico formula created for them. Equifax, Experian, and Trans Union did not create any Fico scores.


There are many models of the Fico Scores made specifically for Experian, Trans Union, and Equifax and each bureau has separate names for their versions:

Equifax has Beacon 09, 05, & 96 or you might see these same versions displayed on the report as Beacon 5.0 and 9.0 as well. There is also Pinnacle 1.0 & 2.0 which is Equifax Fico next generation.


Trans Union Fico scores are called Fico Risk Score Classic 08, 98, or 04. There is also Fico risk score Next Gen. The old name of the Trans Union Fico score was Empirica.


Experian has the Fico Risk Model 08, V2, V3 and Fico Advanced Risk Score 1.0 & 2.0. Experian use to call its score Fair Isaac Risk Score.

Although some of these scores are outdated they may still be used by banks. You can find the name of the model used to the left, right, or above of the score itself on a merged credit report.

Besides Fico scores, there are hundreds of other scores created by each bureau and sold for many purposes to lenders, insurance companies, credit card companies, landlords, finance companies, telecommunication companies, and much more. There are scores that decipher which consumers might be more likely to default on a mortgage already extended, scores that give insight into which consumers should be offered lower interest plus higher limit credit cards. Some scores even predict those who are more likely to go into strategic default on a mortgage loan. There are even global scores used by large corporations doing business internationally.

Just to give you a glimpse into varied scores here is a list of just a small portion of scores that one of the bureaus offers for sale:

In the Market Models
Income Insight
TAPS
National Risk Model-National Equivalency Score
Decision Insight
Credit Migration Solutions
Collect Score
Auto Risk Model
Bankruptcy Watch
Retail Risk Score


These are 10 of 100’s of scores offered by bureaus to corporations as a tool to help identify consumers and existing customers that will bring more profits as well as those that will deliver potential loss.

When we think of credit scores we think of consumer scores used to evaluate risk for mortgages and those that we as consumers buy online. But understanding the vast business of scoring can help us with the big picture. Since we are all being evaluated and watched through these algorithms it helps to get a clearer view of how they work within the corporations that use them.

Find out more information on my website www.northshoreadvisory.com.

Not All Scores Are Created Equal

Bankers mostly use the Fico Score. The higher the score the more attractive the applicant is to the bank. Because many are unaware of the differences in score, a consumer might be left thinking they have a great score right up until they need loan approval and the bank denies them.

For example, a potential property owner was looking for a home in Long Island. He started looking for properties after he ordered his “Credit Score” online and was pleased to find it was a 790. When he met with the agent he bragged about his excellent credit score and he was sure it would be a breeze to get loan approval. After viewing homes for 3 months the buyer finally went to a banker to get a pre-approval letter. While the banker was gathering information to send the letter the buyer found a property he and his wife loved. After the agent made the first offer the client got a phone call from the banker telling him his credit score was a 650 which meant he could not qualify for the loan. The buyer was shocked and did not understand the difference in score. When analyzing the credit with the banker it was clear he had some credit issues. This was very disappointing to both the buyer and the seller. His score problems would have been addressed much earlier if he had been informed that the score he needed to view was the FICO score and not the Vantage score.

This becomes quite confusing to consumers since most sites do not display in neon lights that the score being purchased may be different than the score the bank is using.

FICO
300-850 
The higher the score, the lower the risk for a lender to approve funding. Anything above a 740 is considered excellent credit. Anything below a 620 is considered poor credit.


VANTAGE

501-990 
Also has letter grade ratings from A-F. This could be as much as 150 points higher than Fico.


PLUS
330-830 
Are offered to the public for educational purposes only. They can be twenty to forty points higher than FICO scores.


NATIONAL SCORE INDEX

0-1000 
Also known as the NATIONAL RISK SCORE. The lower the score, the lower the risk. This is the reverse of the scores most of us work with today.


When buying a property one must know what threshold of score is needed to get the best rate and pay the lowest fees for the particular loan that best suits their purchase.

Visit www.northshoreadvisory.com for more information and follow @tracybecker for more credit tips.

Vantage and Fico Scores

You must keep in mind that when it comes to credit not all scores are created equal. For example, bankers mostly use the Fico Score which ranges from a 300-850.  The higher the score the more attractive the applicant is to the bank.  Another example is the Vantage score, this scale is a little different, ranging from a 501-990; additionally including a letter grade rating from A-F. This is important to know because the Vantage score could be as much as 150-200 points higher than a Fico score. Many consumers are not aware of this difference when ordering their credit score online and might receive a pretty high 780 Vantage score which may actually translate into a 650 Fico score. Therefore, the unsuspecting consumer might be left thinking they have a great score right up until they need loan approval and the bank denies them. 

One client, referred to us by a realtor, was looking to purchase a property in Long Island.  He started looking for properties after he ordered his “Credit Score” online and was pleased to find it was a 790.  When he met with the agent he bragged about his excellent credit score and he was sure it would be a breeze to get loan approval.  After showing homes for 3 months the realtor convinced her client to get a pre-approval letter. While the banker was gathering information to send the letter, the buyer found a property he and his wife loved. 

After the agent made the first offer the client got a phone call from the banker telling him his credit score was a 650 which meant he could not qualify for the loan. The buyer was shocked and did not understand the difference in score.  When analyzing the credit with the banker it was clear he had some credit issues. The realtor immediately referred the client to us to see if we could improve the credit score. The client had a few small collections and a late payment on a credit card.  While we were able to improve the credit score by 100 points, it took over a month and by the time the buyer went back to the seller there was an offer accepted already. This was very disappointing to both the buyer and the agent.  His score problems would have been addressed much earlier if he had been informed that the score he needed to view was the FICO score and not the Vantage score.  

 

This becomes quite confusing to consumers since most sites do not display in neon lights that the score being purchased may be the WRONG one. Fico scores must be purchased online at www.myfico.com


The Score you Order May Not be What You Assumed?

Most consumers think a credit score is the same no matter who orders it or what site it comes from. This is totally false. There are Fico Scores, which range from 300-850, & these are the scores used in the mortgage industry. Plus scores were created by the credit bureaus for educational purposes & of course to bring more profits. Plus ranges from a 330-830. Vantage, which was also created by the bureaus ranges from a 501-990 with letter grades from A-F. Vantage is a score that the bureaus created to compete directly with Fico Scores & although they have not been widely accepted by lenders yet they probably will be in the near future. You can buy Fico Scores at Fico. Scores other than Fico could be 30-150 points higher than Fico giving consumers a false sense of security. Know what score you are pulling before you make your purchase. Pulling your own scores does not affect your credit.

"Great Credit Brings Great Opportunity" 

To increase your scores call North Shore today.