New Credit Scoring System, VantageScore
A new credit scoring system has recently been implemented. Actually a second system, I don’t know if it will replace the old FICO score or not. The old FICO (Fair Isaac Corp) system had a range of 300 to 850. This system has been around forever, and good, bad, or confusing it was the standard. If you were 720+ FICO, you could get great interest rates.
The new VantageScore is more like a school report card. It has a numerical range of 501-990, and corresponding letter grades that we can all relate to: 900’s are “A”; 800’s are “B”; down to 500’s… “F”.
The advantage is obvious: the range isn’t as compressed as the old system; and it’s “A – F” is simple to understand. Even your kids can explain it to you. Both system should rate people similarly. If you had great credit before, that won’t change, and vice versa. Where it might help, is for people with little credit history. The old system gave 15% of its score to credit history…little history (not running up a lot of credit cards) could hurt you. This term doesn’t show up in the new system.
Here are the rough scoring categories used by FICO and VantageScore:
|FICO SCORE||%||VANTAGE SCORE||%|
|Payment History||35||History of Payments||32%|
|Credit History-Length||15%||Credit Utilization||23%|
|Types of Credit||10%||Credit Depth||13%|
|New Credit||10%||Recent Credit||10%|
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 main points are disclosed above.
The old rules still apply: It’s good to have available credit, but not too much; it’s good to use credit, but not foolishly.
No system is perfect. My Dad, who passed away a few years ago, never had a credit card or credit account. He paid cash for everything; car, house, everything. If he didn’t have money for something, he didn’t buy it. When he tried to get a cell phone from AT&T (where he had a phone account for 60 years) they turned him down for lack of credit…such is our world today.
So, don’t try to figure it out, or make comparisons, just check your score and use whichever they give you.
Houston Heights Realtor Rich Martin today specializes in Houston Heights homes and the surrounding inner-loop areas. Leave a message if if he can be of help.