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VantageScore vs. FICO credit score and getting a Mortgage

Hi,

I'm just starting to look and think about getting a home, maybe with in a year or so.  I'm 31, married (wife 24, grad. college in 1mo, no credit history), and I make about $110K/year with $1600/month in bills aside from rent.

I'm a little angry after checking out my credit reports and credit scores.  About 2 years ago Infiniti reported me as being 30 days late to all 3 credit agencies. Long story shot, it was total BS but they refuse to remove it and I've tried a few things to no avail (good will letter, calls, dispute it). It's the ONLY negative I've ever had on my account. 

I checked my credit scores but they give me my "VantageScore" from all 3.  It is about 815 for all 3.  This new scale is based on 990 instead of 850.  I'm not sure what my scores would equate to in a FICO score or how good of a mortgage or rate I could qualify for?  Rates are still listed as under 5% but would I be able to qualify for one that low?  Don't the banks/lenders still use FICO?  Why are there two different systems now if the lenders are still using FICO?

My other question would be, do I NEED 20% down now, especially with the way things are now, or is 10-15% no problem?  Makes a big difference if you're looking for something in the range of $250K.

thanks for any input
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April 12 2011 - US
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Answers (28)

Ken, that's in a different format but still has good info. I was curious to see what it said about your revolving accts and it said your utilization was low. 
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April 13 2011
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Here are a couple pictures of what they show me Clay,

http://farm6.static.flickr.com/5025/5617807360_31be5fb8cb_b.jpg

http://farm6.static.flickr.com/5142/5617807446_535a4d1f2f_o.jpg

Not sure if this covers what you are talking about?
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April 13 2011
Ken, are there 4 codes/comments next to the score? What do those 1st two say on that report?
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April 13 2011
No problem, Ken. I just checked with one of the major MI companies and it looks like you should have no issue getting MI there with 10% down in NY. 

I'd look at that number (10% down) as a sweet spot if you can. It makes more sense to save the rest of your money than putting it into the house up front for so many reasons. You may also want to ask your mortgage professional about "single pay MI" and have him/her do an analysis on that for you. It may make more sense than going with a monthly MI program (especially if you can have the seller pay for some or all of it for you, there is a great strategy around this that most people have never even considered).

Sincerely,
Greg
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April 13 2011
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Thanks guys, I feel better now lol.

Clay, thanks and I'll keep that in mind.  Even though I pay off my cards every month, I'm sure at times I've had it up to 50% or more during that month.

Greg, thanks for the info, I'm in the Buffalo, NY metro area, I would most likely be buying with in and area of less than 1 hr of Buffalo.

Ken
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April 13 2011
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Ken -

Thanks for reporting back!  Clearly this indicates Vantage is putting way too much weight on the lack of home mortgage data, making their scores useless for the purpose that you wanted to look at them for.
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April 13 2011

Ken,

Even at 739 you should be eligible for the best rates at most lenders. 720 is pretty much the magic number (and for FHA it doesn't matter at all). There will be some lenders that will be able to give SLIGHLY better pricing if your FICO score is 740+, but for the most part it's 720.

I'd say you're in really good shape.

As for down payment, where are you located? Your loan will be underwritten one way, and the Mortgage Insurance will be underwritten to different guidelines. Some areas of the country still can not get mortgage insurance, even with 10% down, massive reserves, and a 739 FICO score. Although that is changing (for the better). I would see if you can get a conventional loan with 10% down and a decent MI rate, then have your mortgage planner do a total cost analysis for you to help you make that decision.  

As far as the term of the loan, please think strongly about NOT getting any term shorter than 30 years. It's just poor financial advice for anyone, at any time. A 10, 15, or 20 year loan may sound nice on the surface, but it's the 30 year loan that is the right tool for building wealth and creating true financial security. The shorter term loans only hinder your ability to reach those goals.

Sincerely,
Greg

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April 13 2011
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By the way, Fair Issac Company has been around since 1956 doing credit risk analysis from the beginning, and started the FICO score product in 1981.
FICO History

Fair Issac Company summary
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April 13 2011
Good news. Remember, even if you pay the revolving accts in full each month, you would have to go a full billing cycle with no charges to show a 0 balance on the CR. You probably already do this but keep all monthly charges/balance at 30% or less of the credit limit. 
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April 13 2011
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Drumroll....

My transunion FICO score is: 739

All 3 of my reports show almost the identical info and all 3 Vantage scores are almost identical.  So, I don't have much doubt that the FICO scores would also be the same as the Transunion one.  This is with a VantageScore of 814 for Transunion.

(2) things "hurting my score" are:

1. Missed Payments (1 30 day late, 2yrs ago).
2. Short revolving history - 10years 7months, average of "High Achievers" is 19 years.


Glad to see that!  So, if I can get it over 740 and keep it there, I should pretty much be able to get right up there with the best rates available?
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April 13 2011
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Credit card companies, store credit-lines and car sales companies are using Vantage.  They are an OK rating system.  It is not "smoke and mirrors".  But the mortgage industry will not be moving away from FICO.  FICO continues to make revisions to their algorithms to keep the mortgage lending industry and other financial "risk takers" happy.  The cost of running their program is very small compared to what they can lose if they write loans to people that have a high probability of not paying the money back.

FICO also has a "FICO mortgage score" product now; but most mortgage lenders are still staying with the standard FICO score ratings and not moving toward the mortgage specific scoring system yet.

FICO was first in doing machine generated credit-worthiness number comparisons; so they have a long track record that is extremely difficult to compete with, even if the competitor product is written and owned by the people that collect the data and have control of the data.

To see what scoring systems Fair Issac Company offers and what they are designed for, see:
FICO Scoring Products
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April 13 2011
I agree, use MYFICO, the scores I have seen from them are very close. Vantage will not replace Fico.

Come back and post the scores after you use MYFICO.
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April 13 2011
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Pasadenan

I see your points, makes sense, I just hope my FICO isn't nearly that low!  I will sign up and get my FICO scores and forget about the Vantage scores. 

Is it fair to say that the VantageScores are just smoke and mirrors then?  They were required to disclose scores by law so they just make up a new score system yet that system isn't what ends up getting used!  What's the point then?  Do you think there will be a shift to using Vantage in place of FICO in the future?

My main goal at this point is to find out what scores I need to get the best rates and then see what I can do to get them as good as I can in the next year or so.

Appreciate the input from everyone, I will let you know what my FICO is soon!
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April 13 2011
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"the last vantage score I saw was 910, his Fico turned out to be 780."

Using just the linear conversion, the 910 Vantage would be 750 FICO
and the 780 FICO would be 934 Vantage,

thus demonstrating the difference in weighting factors, and why a direct linear conversion is not sufficient when trying to know if a score is above a given threshold for getting a specific rate.

(And remember, the Mortgage lenders use the "middle FICO score" from the three credit rating agencies.  Even if Vantage indicates they are all the same, likely the FICO will still calculate them slightly different, as the data in the databases of the three agencies is not identical).
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April 13 2011
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I will say it again... Don't worry about your Vantage score, unless you are taking out a car loan.  Concentrate on your FICO score, and what you can do to improve that, and making sure you know where that number is coming from and if there are any errors or inaccuracies that the credit rating agencies have on file regarding your credit history.

MyFICO.com has good resources available.  You could even use the "community" section of the site to ask questions and read tips...

But in this specific case, it seems well worth the $20 for access to a "what if" program, and detailed FICO report, with a real FICO score.

From the comments posted on this thread, and the # of accounts open, and the debt to credit limit ratio, I'm not seeing any real flags other than the one-late; but computer programs go based on the numbers and the data input; so you need to find out what the issue is; but not what the Vantage program is doing, but what the FICO program is doing with the data.

(Yes, about 60% of Americans have worse FICO's than 630, but so what?  You don't want to be compared to them).
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April 13 2011
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Your vantage score is supposed to be somewhat like a letter grade in school.  A score in the 700's would be a C and a score in the 900's would be an A. 
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April 13 2011
kristisar, I am not recommending FHA. I would go conv with 10% or more down unless the score is low. Your friend should be getting conv too if they have very good scores, why doesn't their lender give them the option?

Now that Pasa mentions it, the last vantage score I saw was 910, his Fico turned out to be 780.    
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April 13 2011
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By the way, it sounds like it may be worthwhile for you to look at myfico.com, and to possibly pay $20 for a FICO score from one of the agencies and other FICO info.
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April 13 2011
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Thanks for the input Pasadenan.

Though, I find it very hard to believe that my FICO would be anywhere near as low as 631!?!  How would that even be possible with my history?  There is not one single negative in my reports other than a 30 day late payment, 23 months ago.

They also rate my at about 60% (with an 815) compared to the average US rating, which I also can't believe isn't higher.
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April 13 2011
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Since FICO (Fair Issac Company) charges the credit rating agencies to give a FICO score, and the Federal Government mandated that the credit agencies provide scores for "free", the credit rating agencies got together and developed their own rating program (Vantage).  Not only is the top score different, but the bottom score is different too.  And as Clay mentioned, there is no direct conversion since the weighting factors for each type of credit occurrence is different.  Even FICO offers several different scores weighting various occurrences differently.

But, if all you want to do is get in the ballpark, a linear conversion would give you a good approximation.  In that case, the formula would be:
FICO = Vantage/0.8 -387.5
or
Vantage = FICO * 0.8 + 310

(Minimum FICO is 300; Minimum Vantage is 550)

That would make an 815 Vantage approximately 632 FICO
(not good)

Remember, the credit rating agencies don't like dealing with complaints, so they intentionally designed their rating program to give "high" numbers so that people wouldn't complain as frequently, at least not about things that are meaningless or unimportant.
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April 13 2011
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Clay- if he has 10+% down payment, why would you suggest FHA? Do you get a significantly lower rate, enough that it balances out the PMI?

(I have a friend going through this and his lender isnt even looking at conventional, even though he has enough down to do it. Im curious why)
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April 13 2011
2 credit cards with a total limit of about $9K that are pretty much paid off every month.

Even though you pay or almost pay them off every month, does the balance get up to 50% or more of the credit limit? On a conventional loan you usually get the best pricing at 740, a few lenders give further benefit at 760 or 780. To give you an idea of pricing, compared to a 740 a 720 score would cost about .250 in price ( not rate ) and a 700 would cost .750 in price. Today, a 700 score would be aprx 4.875% and lower on FHA.  
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April 13 2011
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20 total accounts with 11 active/open accounts.  2 credit cards with a total limit of about $9K that are pretty much paid off every month.  About 6 are student loan accounts that were opened between '97 - '01 range, all with 0 late payments in the last 7 years (or ever).

Maybe part of it is just not having enough diversity and range of credit?  What kind of credit score do I need to have to qualify for the best rates though?  What score range do you have to be above to currently get a mortgage below 5%?

thanks
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April 13 2011
Oh well, those comments are too generic. How many accounts do you have open? It sounds like you have 2 or 3 installment loans and no revolving accounts. Do you use any credit cards?  
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April 13 2011
Profile picture for ken_class
Thanks for your input Clay.

I looked for the comments you are talking about and they just annoy me more haha.  Here they are:

  • You have no real estate accounts that can be used in determining a credit score. [TransUnion, Experian , Equifax]   A healthy balance of credit and loan accounts is key to achieving a high credit score. It is important to build a record of responsible credit use over time with different types of accounts.
  • Not enough of your accounts are consistently paid on time. [TransUnion, Experian , Equifax]   Payment history is a significant factor in the credit scoring process. Regular on time payments may make you more creditworthy to potential lenders.
Funny that NOT having a house could cause me issues with getting one haha.  The second one annoys me because of the circumstances around the issue and the fact that in my 14yr credit history that ONE 30 day late payment out of hundreds or more, would actually cause issues.  I can see if it is 2-3 or more and shows a history but I think it would be reasonable that if there is only one it be completely overlooked.  Lost mail or one time forgetting and you get boned?  I'll get over it though ha, just annoys me the way it went down too.
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April 13 2011
You would have no problem qualifying for a $250K purchase with 10% down now. There is no formula to convert Vantage to Fico but my guess is you will be around 700 Fico. A lenders report will have 4 codes/comments next to the scores with the 1st comment having the most impact. Does your report show those and if so, what are the 1st two comments? The 30 day late is almost 2 years old and once it ages 24 months the score impact will be negligible.       
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April 13 2011
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Thanks for the input Andy. 

I would have 10%+ for sure but wasn't sure how much of a difference it would make to have 20% as apposed to 10%?  I am saving now and when my wife starts working later in the summer, every penny will go straight to savings.  I have some saved but don't want to have less than $20K available in the bank.  That means if I save 20% (for something in the range of 250K) I need $50K + $20K.  It will take longer than one year for me to build it up to that level. 

I probably could have done better but instead decided to take a couple expensive vacations, get a Vette (paid off in 1 more yr) & Infiniti and paid cash for my wifes college, while maxing out my 401K.  Can't say I regret any of it but I definitely feel my priority changing towards wanting to get a house and some land so I'm saving more serious now.

I think part of it is I don't want to be left out missing the good deals and market that is probably going to be around within the next year or so.
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April 12 2011
Depending on how much you can save would depend on the type of loan you need.

AS a first time home buyer, you can look into FHA loans as they allow you to purchase with only 3.5% down.  An advantage to those who don't have the traditional 10-20% down. 

However, with the income you have, you should aggressively save so that you can have 10-20 down.  Conventional loans will have the best rates and you should seriously consider a 15 yr loan schedule. 

Just be sure that you have 2-3 open and active tradelines and that you manage them wisely.  Your score will improve over time.   Let the "sleeping dog" lie.  Often times paying old accounts or merely disputing them brings the report date current and can be more detrimental to your score.

TransUnion, Equifax, and Experian are the only 3 bureaus whose information you should be concerned about.  

 

  
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April 12 2011
 
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