Many consumers find credit scores to be complicated and difficult to understand. Due to the numerous variations of different scoring models, it can be particularly challenging. When reviewing your credit scores, it is important to recognize whether you are viewing a FICO score or a VantageScore. Additionally, if you are looking at a FICO score, consider whether it is an industry-specific score, a general (base) score, or an educational score.
Let’s break it down some.
FICO Scores:
The Fair Isaac Company developed FICO scores. When a consumer orders a copy of their own credit report directly from the credit bureaus, they are usually looking at FICO 08 or FICO 09 scores. These are base scores, and the models are different than industry score models. Within these two models there are FICO 08 and 09 Auto scores and FICO 08 and 09 Bankcard Scores (used for credit cards). For mortgage scores Experian uses FICO 02, Equifax FICO 05, and Trans Union FICO 04. All of these will result in different scores based on the model that is used. FICO 08 and 09 scores will normally be somewhat higher than other models as they are weighing the types of credit more diversely than industry score models, which are focused on more specific criteria. FICO 08 and 09 are similar in that they are both base scores, however FICO 09 will also factor in rent if certain standards are met. Even if a rent payment does show on a FICO 08 report, it will not be factored into the scores.
Vantage Scores:
Vantage Scores were developed by the three credit bureaus (Experian, Trans Union, and Equifax). When a consumer orders a copy of their credit report from places like Credit Karma they are getting Vantage Scores. The same is true if they are looking at scores provided by their bank or one of their credit cards. These are normally Vantage 03 scores. Vantage scores represent a distinct and separate credit scoring model from FICO scores. One of the vital differences in Vantage scores are how they weigh collection accounts. Vantage 03 and 04 ignore all paid collection accounts regardless of whether they are medical. They also ignore all unpaid medical collection accounts. Whereas FICO scores factors in unpaid medical collection accounts over $500. And they factor in paid collections that are not medical.
Educational Scores:
FICO 08, 09 and Vantage 03 can be considered educational scores if they are free and are not attached to any industry. These are provided by your bank, credit card of other third-party services and normally come with suggestions and tools you can utilize to see how you might improve your credit scores.
Newer Scoring Models:
FICO 10T and Vantage 04 are new models that incorporate Trended Data. This looks at your payment history and balances over a 24-month period. It is more than just a “snapshot” which is what is now provided. Trended data analyzes the historical payment information and can see if just minimum payments are being made on accounts or if larger payments are made in an attempt to minimize debt more rapidly. Trended Data analyzes five categories:
• Balance Amount
• Original Loan / Limit Amount
• Scheduled Payment Amount
• Actual Payment Amount
• Last Payment Date
Current scoring models do not take payment amounts, scheduled or actual into account. While these models are available, they are not widely utilized yet.
When a consumer reviews their credit scores, it is essential to understand which credit scoring model is being used, as different models often produce varying results. For individuals seeking to purchase a home or refinance, it is important to recognize that unless a mortgage broker has obtained the borrower’s credit report, the scores displayed on the consumer’s own reports are not indicative of mortgage scores.