Adios FICO Scores? And What It Means to You…
Bye Bye FICO Scores? And What It Means to You.
I am Jeff Chubb and I wanted to share with you the news that the Federal Housing Finance Agency is now allowing Fannie Mae & Freddie Mac to use an alternative credit scoring model, Vantage Score. And what this means for you and your friends and family when buying a home.
The FICO scoring model was introduced in 1989 and is used by 90% of lenders.
Compared to VantageScore which was introduced in 2006. It’s developers say this model is a more predictive scoring model that is easier to understand and apply.
Many banks are using a combination of FICOs and VantageScore models for mortgages, however until now this was not the case for mortgages secured by a government entity. How much does this matter? In 2017, government backed mortgages accounted for nearly 70% of all mortgages originated in the U.S.
Are we surprised that our Government Backed Mortgage agencies were late to the party?
So what are the differences, how does Vantage Score Group Credit Information?
- Payment history
- Age & type of credit
- Percentage of credit limit used
- Total balances and debt
- Recent credit behavior and inquiries
- Available Credit
Compared to the 5 categories that FICO uses:
- Payment history
- Amounts owed
- Length of credit history
- New Credit
- Credit Mix
Both these lists are ordered by most to least influential.
It has been said that FICO scores tend to be “more conservative than alternatives.”
So what is the real difference?
Basically FICO credit scoring models use data about your borrowing and credit utilization that have been reported to credit bureaus at the time the scores are generated. VantageScore incorporates data that reflect patterns of behavior over time.
Should you have any questions about buying or selling a home, then we would love to chat. You can always reach us at 617.480.2600 or by email at [email protected]
We look forward to being your Real Estate Resource.