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Vantagescore Archives | Ovation Credit Repair Services

FICO vs. FAKO vs. VantageScore

By | Credit Scores

FICO vs. FAKO vs. VantageScore – Things can get confusing when you try to learn about your credit rating. You might get a free credit monitoring service and be happy to receive a free score. However, the number you get is not necessarily accurate — and sometimes it is off by 100 points or more.

To put it simply, your FICO score is the most accurate estimate of your credit rating. Your FAKO score is a non-FICO score. It is not as accurate, but it still gives you a good idea of your score. Your VantageScore is similar, except it stands a better chance of getting used by a prospective borrower.

Fico-Fako-VantageScore

Understanding FICO Scores

There are more than 50 FICO score versions that exist. The most common ones are the FICO Auto Score, Bankcard Score and FICO Score. The particular model which gets calculated is dependent on the type of loan you require. For instance, a mortgage would use a basic FICO Score version while a credit card could get applied for with your Bankcard Score.

The way your FICO score gets calculated is dependent on the version. Typically it will range from 300-850 points. The calculation breakdown is as follows:

  • 35 percent for payment history
  • 30 percent for credit utilization
  • 15 percent for average credit age
  • 10 percent for new accounts
  • 10 percent for credit diversity

Your FICO score will get calculated individually with each of the major credit bureaus. A borrow can have different information with each of their reports. A lender will also choose one of the bureau files to pull. Therefore, your qualification requirements and score can vary depending on the information you have with each file.

The vast majority of lenders determine your eligibility by looking at one of your FICO score calculations. This is the figure you should use when attempting to improve your credit, as well.

Why Your FICO Score is So Important

Nine out of 10 lenders in America are using a FICO scoring model to determine financing eligibility. The most common model is your basic FICO score, which uses the calculation algorithm listed above. However, the way your score calculates can slightly differ depending on the purpose of the financing.

Your Auto Score

This credit rating algorithm is all about making sure you can afford a new vehicle. It looks at your overall monthly affordability based on your current debt obligations. An auto lender will be able to overlook certain things that a credit card issuer might not put past them.

Your Bankcard Score

This particular credit rating model looks more at your credit card debt than anything else. It puts a greater amount of weight into your credit card repayment history than your installment loan repayment activity. This makes it a more effective scoring model for credit card issuers trying to vet you.



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Understanding Your FAKO Score

FAKO scores consist of any credit ratings that are not made up by FICO. The majority of these exist for credit score tracking purposes. You can look at the calculation from month-to-month and get an idea of how your score is progressing. Any positive or negative action will impact as such, but your rating won’t always line up with your FICO score.

There are very few lenders that qualify you based on your FAKO score. It can be a method for pre-approving prospective borrowers. However, the majority are going to request one of your FICO scores from a major bureau. So, you should not put too much weight into your FAKO score.

Some of the more popular credit-based services/websites to offer a FAKO score include:

  • Credit Karma
  • Credit Sesame
  • Quizzle

Each of these companies offer both free and premium credit monitoring services. They serve as an indicator of your credit-building progress. However, it is not enough to go on when determining whether you qualify for a major loan. You should always stick with your FICO score calculations when buying a car or home. Not to mention, the scoring zone (in points) differs and does not always follow FICO’s path.

The Problem With FAKO Scores

There are many different FAKO scores out there and there is not a universal way to calculate yours. In fact, a FAKO score could vary by hundreds of points depending on the algorithm that the calculating company uses. Any sudden changes to your credit report can have a major impact, as well.

Any prospective lender will not generally use your FAKO score. However, a bureau-based score might come into play when trying to pre-approve you for new credit. This means a FAKO score could be an initial screener and sometimes it can be used to bypass a hard inquiry. With a soft pull and a score estimate, some lenders have enough to go on to make their decision.

Here are some other issues with using FAKO scores:

  • No lenders actually use it when screening new applicants
  • The score you see could be very different elsewhere
  • Any single missing entry can severely skew your score
  • Missing a negative item could severely disfigure your perception

Basically, following your FAKO score can send you down a troubling road. It just takes one negative instance to send your FICO score dropping. However, this might or might not happen with your FAKO score calculation. You could be lead to believe your credit is still running strong — when that is not actually the case.

Credit Score

Which Credit Score Are You Getting?

The services above are all very popular and more than one-third of Americans have an account with at least one site. So it is a good idea to know the difference in credit-scoring between each of them.

  • Credit Karma offers your Equifax and TransUnion scores
  • Credit Sesame includes your Experian National Equivalency score
  • Quizzle provides you with your Vantage Score rating

You should research and choose a credit monitoring service with care. The difference in the effectiveness of your credit score estimates will follow.

Typically, your VantageScore rating will be a more accurate guess of your FICO score. But you have to take into consideration the unique information found on your file at each of the credit bureaus. Any missing positive items will hold your credit rating down on a particular report.

Understanding Your VantageScore Rating

Once upon a time, your VantageScore would make up for approximately 10 percent of your loan qualifications. It is now not so dominant, but there are still quite a few lenders that consider this score.

Your VantageScore 3.0 rating will fall in the 300-850 point range. The main calculation factors are as follows: your payment history, credit age, type, utilization, available credit, total balances and debts, and recent credit behavior.

The main difference with your Vantage Score is that you put more weight in your average credit age. This is less of a factor than your utilization rate with your FICO score, but that is not the case with your VantageScore calculation.

Here is why your VantageScore rating still matters:

  • Nearly 10 percent of lenders use it
  • Works well for ongoing credit risk analysis
  • Provides a fair calculation even without 2 years of payment history
  • Any score changes are systematically calculated with each new entry

Furthermore, there are approximately 30 million more Americans with calculable credit scores using this model over any other. This means that even thin file borrowers and people in credit despair can benefit from following their VantageScore rating.

Conclusion

There are three different sets of credit scores that exist — FICO, FAKO and VantageScore. Each are useful in their own right, but only your FICO scores will truly matter in the end. You should not get caught up in tracking the others as anything more than a general indication of your progress from month-to-month.

It is understandable that you cannot pull your report and get a proper calculation every single month. Instead, all you can do is track your report changes monthly and estimate the score impact.

Sources:

http://myfico.custhelp.com/app/answers/detail/a_id/469/~/fico%C2%AE-score-versions-included-in-your-credit-report

http://www.doctorofcredit.com/credit-scores/fako-score/

https://www.vantagescore.com/images/resources/VantageScore3-0_WhitePaper.pdf

https://www.quizzle.com/resource-center/credit-q-and-a/how-is-my-vantagescore-credit-score-calculated

http://www.myfico.com/crediteducation/how-lenders-use-fico-scores.aspx

https://blog.smartcredit.com/2010/05/01/what-is-an-auto-credit-score/

Understanding Your Credit – Score, Reports and Bureaus

By | Credit Reports

Understanding Your Credit

Most Americans do not realize how credit scores, reports and bureaus actually work. In fact, 42 percent believe the myth that lenders must report to all three major credit bureaus. This is wrong and causes a huge headache at times. The truth is that your score could vary by as many as hundreds of points between your files at each of the bureaus.

This is just one of many examples of credit misinformation. When you research how credit works, there is a web of knowledge to uncover. It all helps you become a better borrower, as you can pay your debts and manage new credit more efficiently.

Credit Scores & FICO Explained

Your credit score, or “FICO score,” is something you need to mentally master. It is a single output that significantly impacts your borrowing abilities and creditworthiness. All credit score factors matter to you – therefore, it is essential to have a solid understanding of how they work.

The Types of Credit Scores

While there are many types of credit-scoring algorithms, the majority are a type of FICO score. This is why the term “FICO” goes hand-in-hand with “credit score” so often. If you hear the term “FAKO score,” it just means anything but a FICO score.

Here are some different credit-scoring models that exist:

  • BEACON
  • CE
  • Empirica
  • FICO
  • VantageScore 3.0

At least nine of 10 lenders use a FICO score to screen applicants.

 

(Source wwww.myfico.com)

How Does FICO Calculate Your Credit Score?

  • Payment History = 35%
  • Amounts Owed = 30%
  • Length of Credit History = 15%
  • New Credit = 10%
  • Credit Mix = 10%

Of course, each type of credit rating will have a slightly different algorithm. But, you should hold these rating factors as the most important variables. Focus on avoiding delinquencies or worse, and start bringing your total debt down.

Hint: pay revolving debt first. Your installment debts (such as student loans) do not count toward your utilization ratio.

Which Credit or FICO Scores Do Lenders Use?

FICO offers 28 main score versions to each of the three major credit bureaus. It provides a scoring algorithm for these bureaus to determine a FICO score to assign to each file. With the help of FICO, every credit bureau also has an in-house scoring model. They are as follows: BEACON (Equifax), FICO Risk Score (Experian) and Empirica (TransUnion).

A lender will decide on which credit bureau to pull your file from. That bureau will dictate the score that is provided – based on the type of account you wish to open. This means your score could vary for a car loan, home mortgage and so on.

Auto Score vs. Bankcard Score vs. FICO Score

There is an appropriate time for a lender to use each type of score. FICO Score 8 is the most generally accepted model between borrowers and lenders. Older FICO score versions are regularly used and more common in the mortgage market. FICO Auto Score is the go-to score when qualifying an applicant for an auto loan, and Bankcard Score is used to measure the worthiness of credit card applicants.

FICO Scores Used by Auto Lenders

FICO Auto Score is most common, but the version each bureau uses will differ. Equifax typically supplies FICO Auto Score 5 or 8. Experian uses Auto Score 2 or 8. Meanwhile, TransUnion falls to Auto Score 4 and 8. Since the FICO Auto Score 9 recently came into being, it might start gaining traction with any or all of the credit bureaus soon.

FICO Scores Used by Credit Card Issuers

FICO Bankcard Score 2 and 8, and FICO Score 3, are all sometimes pulled for the purpose of making credit card lending decisions. FICO Bankcard Score 9 also now exists but is not yet commonplace. The Bankcard Score focuses more on your credit card history and less on your medical debts, utility bills and any one-off missed payments.

FICO Scores Used by Home Loan Providers

A mortgage broker or private lender will typically use a dated FICO Score. This is because the underwriting rules for the U.S. mortgage industry require the use of older versions. As such, Equifax uses FICO Score 2, Experian uses FICO Score 5, and TransUnion uses FICO Score 4 to qualify mortgage applicants.

Even after reading about scores here, you no doubt have some questions. A good way to gain more knowledge is by reading the informative content on myFICO.com’s website. This will give you a better idea on how the credit rankers run things, too.

Credit Report Mystery

Reading and Understanding Your Credit Report

Confusion forms when you first look at your credit report. It is hard to know what is there, what is not and how things got there in the first place. But, this foggy way of thinking clears up once you get a good grasp of basic credit report terms. Below are some things you might find in your file:

Default

After you fail to pay, it will say you are in default on your debt. This happens after you fail to repay as scheduled. With credit cards, a default is usually reported after you go 90 days without making any payments. The default status will stay on your credit report for six years before it drops off.

Derogatory

A derogatory mark means only that the item is a negative one. It usually implies a late payment, charge-off or court judgment against you. It serves as a warning from a scorned lender and symbolizes a lack of creditworthiness. The derogatory status can stay on your report for up to seven years.

Satisfied

A satisfied item is anything that went into dispute with a creditor but is now fully resolved. As with all public record documents, a court judgment will stay in your file for seven years from the date you satisfy the debt.

Settled

A settled item is a debt that was in arrears but no longer exists because a settlement agreement was made between you and the creditor. This is a payoff that allows you to settle for less than what you actually owe – it is common when dealing with debt collectors since they pay pennies on the dollar to own the debt and will typically negotiate. Not paying the total amount back can harm your score, and the damage will stay on your file for seven years.

If you are a responsible borrower, the positive terms you might see include “Pays As Agreed” or “Paid/Closed Never Late.” Additionally, when you start running late on your payments, you might see 60 Days Past Due or 120 Days Past Due on your report.

What Else Your Credit Report Tells You

Your credit report contains many other pieces of information aside from the current account status for each debt. Take a look below to better understand what all is on your credit report and how to read it.

Personal Information

Your credit report will provide personal information, including your full name, where you live, your place of employment and your Social Security number. This data is gathered from the various accounts you hold that are being reported to the credit bureaus. A credit report will get an update to its information any time an account is updated. It can mix up information at times if your accounts are not up-to-date, so keep that in mind.

Soft / Hard Inquiries

Any time a lender pulls your file, it will result in an inquiry. This inquiry can be either soft or hard, with the latter having a short-term negative impact on your score. Soft inquiries mostly occur when employers run a background check for employment purposes. Many lenders will also perform a soft pull of your credit report to see if you pre-qualify for one of their offers before sending it to you.

Hard inquiries occur when lenders determine your creditworthiness at your request. A hard pull can drop your score a few points but will drop off of your report two years after it posts.

Public Record and Collections

Your credit report will include any public records in your name, such as bankruptcies, court judgments, foreclosures, lawsuits, wage garnishments and tax liens. The length of time these entries stay on your reports is variable. A civil judgment will last for seven years. Meanwhile, tax liens are very dangerous – they drop off seven years after the paid date, but leaving them unpaid can plague your file for 15 long years.

Credit Errors

 

Tackling Your Credit Report – and the Errors!

You have a credit report on file at Equifax, Experian and TransUnion. Each bureau accepts information from credit reporting companies. The creditors submit details to one, two or all of the major bureaus. Thus, it is possible for your reports to contain inconsistent information.

Some lenders will pull from one credit bureau only. This means your chance to qualify for credit comes down to which bureau they choose. So, it is important to make sure your information is accurate. You also need to make sure that all your accounts show up on each of your reports.

Boost Your Score by Fixing Credit Report Errors

Did you know that the FTC’s 2015 follow-up study on credit report accuracy found that roughly 20 percent of subjects saw a credit score increase after fixing errors found on their reports? This news came after discovering that 20 percent of credit reports contain at least one inaccuracy.

These errors are often little details that get mixed up. This typically happens when lenders only report to one of the credit bureaus. The missing pieces of your payment history can make or break your credit score. Furthermore, having only part of your debt in each file will result in an inaccurate calculation of your credit utilization rate – for better or worse.

Credit Report Errors Worth Disputing

The hardest thing to decide is whether you should report an error or not. It is not wise to ignore anything that is incorrect, but many issues will not impact your score. Little discrepancies in your personal information, for example, will not lead to a points boost.

The best time to report an error is when you see a major issue. If something is literally holding your score down, then you should report it. Even as little as 25 points can influence how you are able to build your credit. Imagine a few unjust rejections as you apply for loans and credit cards – these further drop your score. Ultimately, you look like a less reliable borrower than you really are.

Here are the errors that can impact your FICO score the most:

  • Letting an account enter Collections status = up to 100 points
  • 30 days delinquent on a bank card debt = up to 100 points lost
  • Missing a single credit account = up to 100 points difference by file

Understand that if you have an error causing a 100-point difference, it is severely holding you back. Going from a 780 to 680 score alone can result in more than $450 annually spent on extra interest. Take advantage of the chance to improve your score whenever you can. However, make sure not to fabricate errors or exaggerate issues to get bad debts removed.

How to Find Errors on Your Credit Report

First, simultaneously obtain current copies of your credit reports from the big three credit agencies. Then, you can compare the data and determine where any inconsistencies lie. This will be effective for picking up on most or all errors, but further review may still be still necessary.

One thing to watch for is debt that gets sold and resold. The information can change with time, and even the amount owing might be different. Any discrepancies may be grounds for removal of the entry.

This can bring your score up, but, how much will it increase? Four in every 1,000 reports with errors will see a change of as many as 100 points. This is a staggering statistic, but you should look at the stats affecting the majority. Five percent of erroneous credit reports contain inaccuracies of 25 points or more.

It is free to dispute credit reporting errors. Do this if you find anything in your file to be unfair or unjustified. Your credit score will improve after the errors are removed. However, make sure to only report true inaccuracies; if the debt reappears, your score boost will reverse itself fast.

Step-by-Step Credit Report Error Guide

So, have you come to the decision that reporting your errors is the right thing to do? It can make a major difference and aid you in your journey to rebuild your FICO score. With that said, you will only get good results if you follow the proper protocols.

Here’s how you can go about reporting errors in your credit file:

Contact the Credit Bureau

Reach out to the credit bureau to report your claim with a dispute letter. Be respectful, and provide all evidence you have to back up the fact that an item should be removed. If the information is inaccurate with all three bureaus, make sure to report the problem to each.

Wait to Hear Back

The company that reported the debt will have a short period to dispute your claim. This is when any information against you can come into play. After that, the dispute can go into mediation for a final judgment. Typically, you will hear back from the creditor within 30 days.

Usually, the judgment will be completed within this short time frame. In difficult situations, though, it can run on for a few months or longer. Once all is over, your score will recalculate. However, it is important to note that the entries might drop off temporarily and return after evidence against you is found. So, if you report factually accurate entries, it could end up leaving you in a worse position later.

What if You’re the Victim of Identity Theft?

This is an entirely different situation, but the process for handling identity theft is somewhat similar to reporting other issues. You must contact the credit bureau(s) with your claim. However, to be better prepared, a copy of your FTC Affidavit should be supplied. You can also use this to obtain a police report at your local police station.

Supplying all this information, along with your proof, will be adequate. From there, you will wait for a reply and see if any further documents are needed. Identity theft entries can damage your score drastically, and they should be reported as soon as you notice them.

Furthermore, it is important to watch out for identity theft all the time. This issue hurts many Americans every year, and there are endless ways for fraudsters to target you. There are many free identity theft protection services that work wonders.

If you believe you are the victim of identity theft and have contacted the credit bureau, you will also receive a fraud alert on your credit report. This lets lenders know to be careful when dealing with someone who connects to your file.

Read the FTC’s Disputing Errors on Credit Reports to learn the entire process.

Credit-Related FAQs

You should have a clearer view now of how credit works, but here’s extra info (and reminders) to help you out!

1. Do Lenders Report to ALL Credit Bureaus?

A lender can post information to one or all of the major credit bureaus, which are Equifax, Experian and TransUnion. This data will calculate into your FICO score. Eventually, a lender will use your credit rating to determine your loan eligibility. Your reports can get mixed up and have varying scores, which can result in unjust denials of credit.

2. How Do Credit Bureaus Collect Personal Data?

Information like your current employer and physical address can come from your credit card issuer, your loan provider or your utility provider. These data points are put in your file on a somewhat regular basis – monthly, quarterly, etc. This gives the bureaus what they need to try and keep your personal information up-to-date.

3. How Do You Get a Copy of Your Credit Report?

Go to www.AnnualCreditReport.com to make a request online. This is a service that allows U.S. citizens to request a free credit report from Equifax, Experian and TransUnion. You can pull your reports once a year, and per the FACT Act, it is your legal entitlement. You may view the reports online or request that printed copies be mailed to you. However, keep in mind that this will only get you copies of your reports – and not the associated credit scores.

4. How Often Should You Check Your Credit Report?

You should always stay up-to-date with what posts to your credit report at each of the major credit bureaus. Spread things out, and check one of your files every four months. Alternatively, a free or affordable credit monitoring service can help you keep tabs on things.

5. Can You Find Out Which Score a Lender Will Use?

Thanks to the FCRA Act, a lender must include “the range of possible credit scores under the model used to generate the credit score.” This means you will know whichever credit ratings a prospective lender receives. Not only that, but you will also be told the type (version) of FICO score that was pulled for your application.

6. How Long Does Stuff Last on Your Credit Report?

  • Unpaid tax liens: Up to 15 years from the filing date
  • Bankruptcies: 10 years – possibly seven years if you get a Chapter 13 discharge
  • Tax liens: Seven years from the filing date
  • Collection accounts: Seven years + 180 days from the first month’s missed payment
  • Foreclosure: Seven years after the date of your foreclosure
  • Late payments: Seven years after the date of the payment delinquency
  • Charge-offs: Seven years after the date your debt is written off as a loss
  • Soft inquiries: Two years from the date of the inquiry
  • Hard inquiries: One year from the date of the inquiry

Sources:

https://blog.creditkarma.com/personal-finance/how-much-do-americans-really-know-about-credit/

http://www.myfico.com/crediteducation/credit-score.aspx

http://www.myfico.com/

https://www.ftc.gov/news-events/press-releases/2015/01/ftc-issues-follow-study-credit-report-accuracy

https://www.ftc.gov/news-events/press-releases/2013/02/ftc-study-five-percent-consumers-had-errors-their-credit-reports

https://www.consumer.ftc.gov/articles/0151-disputing-errors-credit-reports

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