FICO versus VantageScore?

Question

Hi BiggerPockets - This question is for the lenders on the site. I understand the differences between a FICO score and a VantageScore. Which do you prefer loan applicants check prior to applying for a loan? and WHY?!

They seem to be interchangeable/on the same scale (at least a VantageScore 3.0 and above), but conventional lenders prefer FICO? Trying to understand why.

Chris Mason · Answer

Context. Vantage and FICO are two companies that offer credit scores.

Each one pulls data from the 3 big credit reporting agencies.

On top of that, FICO has some 28-odd different algorithms. A landlord, a bank offering you a credit card, a car lender, and a mortgage lender, are all using different algorithms, and will all show different scores. 3 times 28 equals 84 different FICO scores per consumer. A variance of 40 or 70 points between algorithms is perfectly normal. Month to month variance, 20 or 30 points up and down swing is normal.

I'm sure you will understand my skepticism when someone calls and says "My credit score is 723." That just means one of those 84 scores is 723.

Lenders use the middle of the 3 mortgage-specific scores. I have one right now where the consumer called me with a sad face: "I have a credit score of 673, what would my rate be?"

His 3 mortgage specific FICO scores are 688, 744, and 756. We used the middle one, as mentioned, of 744 (it's illegal to play games with this for more profit, etc, has been for many years). Needless to say, we turned that frown upside down. He'd successfully removed an incorrect derogatory comment from 2 of the 3 credit reporting agencies, his internet source for his non-mortgage score happened to be reporting the 3rd (it was a car loan "late" payment, so perhaps his car loan FICO score being used is why it was lower than his mortgage score).

So I am sure you will understand my skepticism when it comes to self-reported scores. Consumer self reported scores are generally accurate on the very high end (790 reported v 820 actual = same interest rate pricing, no difference), and very accurate the very low end (480 reported v 498 actual = no Agency mortgage either way).

For everything in the middle, I've only ever had one single consumer accurately self report. He went to the FICO website, clicked "see the scores by mortgage lenders," paid $25, and me running his credit the exact same day (which I also paid $25 for...) yielded the exact same credit score. When someone self reports 677 or 723, I don't know which way it will go, half the time 677 stated becomes 715 actual, and half the time 723 stated becomes 697 actual. But it's important not to get your heart set on something based on a Discover card statement or Credit Karma if you are anywhere in that mid-range from about 580 to 740 that about ~80% of consumers are in.

740+ is the best rates for conventional conforming. 760+ is the best for PMI. For "jumbo" loans, every little bit up to and above 760 can help. For FHA, they aren't super FICO sensitive, 640 and 720 aren't all that different, call it 0.375% to rate holding constant fees.

Kevin Luttrell · Answer

@Lauren Hogan

Good question. All conventional mortgage lenders to my knowledge use FICO, but each credit bureau also has multiple versions of the FICO model too. There's really no way to check yourself and see exactly what scores a lender will see when they run your credit (if anyone knows something I don't on this matter, I'd love to hear it).

The algorithms used for calculating the credit score are different between Vantage and FICO, and even between the different FICO models. In my experience VantageScores are usually higher than FICO (at least the versions used by mortgage companies). You can get a relatively good idea of what your credit scores are by checking the free places like Credit Karma, Credit Sesame, etc, and many banks and credit cards will also show your credit score for free nowadays, but you'll really just need to do a credit inquiry with a lender to find out exactly what it is they'll use.

Tyler Rowland · Answer

My company uses the Fico Scores, the reasons for that from what I understand is from a credit history standpoint, for example, there are people that have very little credit history and will not even have a fico score.  For Fico to generate a score, there needs to be at least 6 months worth of history.

If there are no credit lines reporting within the last 6 months, there will be no credit score, and no loan.  Whereas vantage scores will generate a score even if there is little credit history.  SO when people download credit monitoring apps, which principally use Vantage scoring models, they will almost always generate a score for even those with little credit history.

Fico seems to take into account factors that are more valuable to lenders that are extending secured debt.  Vantage seems to be valuable to lenders offering consumer debt like auto loans, student loans.  People who may not have had a lot of time to establish credit are usually the ones who need a vantage score.

Lenders want to see that you are making payments and keeping balances low on unsecured debts i.e. Credit cards, before they give out secured loans, or a loan that is secured by a home or something of value.

Dave Skow · Answer

FICO......most lenders use a tri merge  report ( accesses all 3 main bureaus ) and  uses middle score .....the consumer models out there  tend to also use the  same  sort of scales so its  best to  have them  using same sort of system that most lenders use

Lauren Hogan · Answer

@Kevin Luttrell @Chris Mason appreciate the responses guys!

FICO versus VantageScore?

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