The VantageScore credit reporting method is compared to the old FICO method.
A new credit scoring system has recently been implemented. Essentially a second system, I don't know if it'll replace the old FICO score or not. The old FICO (Fair Isaac Corp) system had a range of 300 to 850 points. This system has been around forever , and good, bad, or confusing it was actually the standard. If you were 720+ FICO, you could get great rates. I regard myself as a Houston Heights Realtor, lenders love my clients with 720+ FICO scores.
The new VantageScore is more like a school report card. It has a numeric range of 501-990, and corresponding letter grades that we can all relate to: 900's = A; 800's = B; down to 500's = F.
The advantage is obvious: the range is not as narrow as the previous system; and it's A-F is straightforward to understand. Even your children can explain it to you.
Both system should rate applicants in a similar fashion. If you had great credit before, that will not change, and vice versa. Where it might help, is for applicants with very little credit history. The previous method gave 15% of its score to credit history...little history (not running up a lot of visa cards) could hurt you. This term doesn't show up in the new system.
Here are the basic categories used by both:
Old FICO Score
- Payment History: 35%
- Age of Credit: 15%
- Credit Balance: 30%
- Credit Type: 10%
- New Credit: 10%
New VantageScore
- Timely Payment: 32%
- Credit Utilizationi: 23%
- Account Balance: 15%
- Credit Depth: 13%
- Recent Credit: 10%
- Available Credit: 7%
The new VantageScore system was developed jointly by the 3 credit reporting agencies TransUnion, Experian and Equifax. Because all 3 agencies will now use the same system, scores from all 3 agencies should be closer together. Previously each agency calculated their scores differently. Now, the details of how scores are calculated are still confidential, but the key points are disclosed above.
The old rules still apply: It's good to have available credit, but not excessive; it's good to use credit, although not foolishly.
No system is foolproof. My Dad, who passed away a few years ago, never had a Visa card or charge account. He paid cash for everything; auto, home, everything. If he did not have cash for something, he didn't buy it. When he attempted to get a mobile phone from AT&T (where he had a phone account for decadess) they turned him down for absence of credit...such is our world today.
A new credit scoring system has recently been implemented. Essentially a second system, I don't know if it'll replace the old FICO score or not. The old FICO (Fair Isaac Corp) system had a range of 300 to 850 points. This system has been around forever , and good, bad, or confusing it was actually the standard. If you were 720+ FICO, you could get great rates. I regard myself as a Houston Heights Realtor, lenders love my clients with 720+ FICO scores.
The new VantageScore is more like a school report card. It has a numeric range of 501-990, and corresponding letter grades that we can all relate to: 900's = A; 800's = B; down to 500's = F.
The advantage is obvious: the range is not as narrow as the previous system; and it's A-F is straightforward to understand. Even your children can explain it to you.
Both system should rate applicants in a similar fashion. If you had great credit before, that will not change, and vice versa. Where it might help, is for applicants with very little credit history. The previous method gave 15% of its score to credit history...little history (not running up a lot of visa cards) could hurt you. This term doesn't show up in the new system.
Here are the basic categories used by both:
Old FICO Score
- Payment History: 35%
- Age of Credit: 15%
- Credit Balance: 30%
- Credit Type: 10%
- New Credit: 10%
New VantageScore
- Timely Payment: 32%
- Credit Utilizationi: 23%
- Account Balance: 15%
- Credit Depth: 13%
- Recent Credit: 10%
- Available Credit: 7%
The new VantageScore system was developed jointly by the 3 credit reporting agencies TransUnion, Experian and Equifax. Because all 3 agencies will now use the same system, scores from all 3 agencies should be closer together. Previously each agency calculated their scores differently. Now, the details of how scores are calculated are still confidential, but the key points are disclosed above.
The old rules still apply: It's good to have available credit, but not excessive; it's good to use credit, although not foolishly.
No system is foolproof. My Dad, who passed away a few years ago, never had a Visa card or charge account. He paid cash for everything; auto, home, everything. If he did not have cash for something, he didn't buy it. When he attempted to get a mobile phone from AT&T (where he had a phone account for decadess) they turned him down for absence of credit...such is our world today.
About the Author:
Rich Martin is a broker/associate with Better Homes and Garden Realty, in Houston Heights. His specialty are the 90-100 year old Houston Heights homes and 1 in surrounding 1940's areas like Garden Oaks, Oak Forest and Timbergrove. He sells old houses and new construction that keeps the feel of the existing neighborhood. He's got a blog/website covering these old Houston neighborhoods.
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