How the VantageScore differs from the FICO score?
Lenders and credit providers have established a new way of determining consumers’ credit eligibility over the past few years. VantageScore is the solution widely used at the moment. This particular option was formed when three top credit reporting bureaus merged to start their exclusive model to offer companies an alternative to FICO score.
Even though many borrowers see the rise of VantageScore, not many of them understand how different it is from FICO score. To simplify things for you, the Coast Tradelines finance team has developed the following FAQs that will guide you through the key differences between the two credit score models. Visit coast au tradelines got more.
What’s the key difference between VantageScore rating and that of FICO score?
VantageScore was started after the merger of Experian, Transunion, and Equifax. These three reporting bureaus can calculate the same score using the new reporting model. Financial institutions and various lenders can quickly review a standard score approved by the three companies. This is vital when determining if a borrower qualifies for a loan or credit.
If you had initially requested a credit score report by contacting the three credit reporting companies that make VantageScore, you will notice that each of them has a different figure compared to FICO score. VantageScore grants both lenders and borrowers a smooth time because of the reports they provide.
How do they calculate their scores?
The improvements made since its introduction have seen VantageScore emulating the FICO score. In both, they give you a three-digit credit rating starting from 300 to 850. The difference is seen in how the calculations are done.
For VantageScore, they include on-time payments history, the borrower’s account balance, and the available credit. It is different in FICO score whose ratings are based on extra factors on the borrower’s credit expenditure, a combination of the account types used, and how new the credit issued is.
Why do mortgage lenders prefer FICO score?
Banks offering government-backed mortgages mostly use FICO score to determine the credit eligibility of potential homeowners. In specific mortgage programs given by the federal government, it is mandatory to review a borrower’s FICO score.
FICO offers lenders a three-digit numbered score ranging from 300 to 850. This shows a borrower’s creditworthiness range, which could be from ‘very poor’ to exceptional.’ If a borrower’s score is low, chances are their mortgage may go default, and this could result in a shutout. Most lenders prefer avoiding this, so they opt for FICO score that generally shows the chances of defaulting mortgage payments by borrowers are minimal.
How is VantageScore helpful when renting or moving into a new house?
VantageScore can be used for turning on the utilities in property renting or when relocating to a new house. Landlords can use VantageScore ratings to determine the tenants they can rent their apartments to.
How do lenders look at each score?
Most lenders will look at either VantageScore or FICO score when applying for consumer credit. VantageScore rating provides elements for calculating your score, making more sense to a credit card company than those used by FICO. Primary factors considered include borrowing history and on-time payments made. Scores may vary between VantageScore and FICO.
Can VantageScore improve my score than FICO score?
The ratings for different score types in VantageScore and FICO score differ. A ‘very poor’ rating in FICO (300 to 579) differs from that of VantageScore (300 to 499). Your rating will look better with VantageScore.
Where can I learn how to boost my credit score?
Coast Tradelines has different tools to help you request your credit scores and also give ways to enhance them faster. Our highly experienced credit team will help you understand all the available options and let you know the best to match your credit targets.