FICO 10 and FICO 10 T are new credit scoring models developed by FICO that have the potential to change the credit industry in a major way.
Credit expert John Ulzheimer, who worked for FICO for seven years and has almost 30 total years of experience in the industry, explained what FICO 10 and FICO 10 T are and what they mean for you as a consumer in an episode of Credit Countdown.
Disclaimer: The views and opinions expressed in this article are strictly those of John Ulzheimer and do not necessarily reflect the official stance or position of Tradeline Supply Company, LLC. Tradeline Supply Company, LLC does not sell tradelines to increase credit scores and does not guarantee any score improvements. Tradelines can in some cases cause credit scores to go down.
What Are FICO 10 and FICO 10 T?
The FICO 10 and FICO 10 T credit scoring models are part of the latest generation of credit scores in FICO’s lineup, which also includes FICO score generations 2, 3, 4, 5, 8, and 9. Currently, the most widely used base model is FICO 8. With every new FICO score, FICO tries to improve upon the power of their scores to predict consumer defaults, which is the overarching goal of credit scores generally.
The tenth generation of FICO credit scores is technically called the FICO 10 Suite, as it contains multiple different versions of FICO 10, although in common language this entire group is often simplified as just “FICO 10.”
FICO 10 was announced in early 2020, and it has received much media attention due to the changes that distinguish it from its earlier counterparts.
Why Are Consumers Worried About FICO 10?
Media coverage of the new suite of credit scores tends to focus on the claim that some consumers may see their credit scores go down with FICO 10.
However, John Ulzheimer says that this creates “controversy where controversy doesn’t exist.”
Why? Here are two reasons.
1. The FICO 10 Suite is a normal redevelopment of the FICO credit scoring system.
As we discussed above, FICO regularly redevelops their credit scoring models in order to make them more and more predictive of credit risk.
This is just like what other companies do with their products. Think of Apple and the iPhone: there isn’t just one iPhone anymore. They introduce newer generations of the iPhone, and people want to upgrade to the new and improved models that work better.
This does not mean that the previous versions were “bad,” just that there is a new version that may be better.
2. Your credit scores will be different every time FICO redevelops its credit scoring system.
With every change that is made to the credit scoring system, as an inevitable consequence, your credit score will change. That’s not necessarily a bad thing. Your credit score could go up, or it could go down, or it could remain similar to where it was.
Regardless of any changes made, the fact is that if you have a good credit score with one scoring model, you will likely still have a good credit score with a different model. The same goes for bad credit scores. Although different credit score versions have different ways of going about it, they all share the ultimate goal of predicting a consumer’s credit risk, and this will be reflected in your scores regardless of which particular credit scoring model is used.
There are dozens of different credit scoring models, and your credit score is going to be different with each model.
How Will FICO 10 Affect Your Credit Score?
In terms of how FICO 10 could affect your score, John says that newer credit scoring models such as FICO 10 do a better job of separating high-risk and low-risk consumers than older models. In other words, if you have good credit, your score is likely going to be higher with FICO 10. If you have bad credit, your credit score is likely going to be lower with FICO 10.
According to John, this is normal and it is what you would expect to see with any new credit scoring system.
What About FICO 10 T (FICO 10 Trended)?
The “T” in FICO 10 T stands for trended data.
FICO 10 T is unique among FICO’s roster of credit scores because it is the only tri-bureau FICO score on the market with trended data. (FICO competitor VantageScore also has a credit score that uses trended data, VantageScore 4.0.)
What Is Trended Data and Why Is It Unique?
When you check your credit report, you may see that some of your accounts show a history of your balances, your payments due, and how much your payments actually were each month for the past 24 months.
Being able to see this information over time makes it easy to understand the trends in your usage of the account.
Here are some examples of the types of insights trended data can provide:
If you are running up large balances over time. If you are keeping your balances relatively low over time. If you have been making your minimum payments over time. If you have been paying in full over time. What percentage of your balance you have been paying over time.
Trended data allows credit scores to consider trends in how you have managed your accounts over the past 24 months.
FICO 10 T can now consider this data as part of calculating your credit score.
The information trended data provides is very valuable because it adds another level of data that helps to predict the likelihood that a consumer will default.
For example, a consumer who has a perfect payment history and pays in full every month or keeps a relatively low balance is probably going to score better with FICO 10 than a consumer who maxes out their credit cards or keeps a relatively high balance over time, even if they pay off their credit cards every month.
The research done on trended data demonstrates that transactors, those who charge balances and then pay in full, carry less risk than revolvers, who roll over a portion of the balance from month to month rather than paying it off in full each month.
Consumers who carry a balance over time instead of paying their balances off in full every month will be penalized by FICO 10 T.
To summarize, trended data is what makes FICO 10 T different from the base version of FICO 10. FICO 10 still works like other traditional credit scoring models in that it only looks at a “snapshot” of your credit report at a given time.
Should You Be Worried About the FICO 10 Suite of Credit Scores?
You don’t need to stress out about FICO 10, especially if you have good credit, as you will still have a good credit score under FICO 10.
The same practices that are important in other credit scoring systems still apply to FICO 10 and will still reward you with a good score:
Always make your payments on time. Pay off your credit cards in full every month. Keep your balances low relative to your credit limits (maintain a low revolving utilization ratio). Limit the number of hard inquiries that hit your credit report by only applying for credit when you actually need it.
We hope this article helped you understand the new FICO 10 and FICO 10 T credit scores. Check out the video below, and browse our Knowledge Center and subscribe to our YouTube channel for more content like this!
The vast majority of lenders use your FICO credit score to evaluate your credit risk as a consumer when they are deciding whether or not to extend credit to you. And yet, historically, it has been costly for consumers to access their own FICO scores.
Popular websites such as Credit Karma and Credit Sesame offer free credit scores, but the scores provided are usually VantageScores, not FICO credit scores.
Knowing your VantageScore is still valuable information, but it is not directly tied to your FICO Score, so it is less useful when it comes to preparing to apply for credit. While it is often true that a consumer’s FICO score is similar to their VantageScore, in some cases, they may be vastly different, especially depending on which credit scoring models are used and which credit bureaus are providing the credit report information.
If you need to check your FICO score, where can you do so without paying a fee to access it?
Here are some of the best places to get your FICO score for free.
Your Credit Card Issuer
Several major credit card issuers now offer consumers the ability to check their FICO scores for free.
Discover Bank
Discover offers a free way to check your FICO score with their Credit Scorecard program. Even consumers who do not have a relationship with Discover Bank can freely use this feature.
Experian provides the credit report data that is used to calculate your FICO score. Your credit score updates once every 30 days and Discover notifies you when it is time to check your new FICO score.
In addition, Discover’s FICO Credit Scorecard keeps track of your credit score history so you can see how it changes from month to month.
The Credit Scorecard also provides a summary of what is going on with each of the five credit score factors that are influencing your FICO score: your payment history, credit utilization, length of credit history, mix of credit, and new credit (e.g. inquiries). You can find educational information about credit scores on the website as well.
To access your FICO score with Discover’s FICO Credit Scorecard, either visit their website or use the bank’s mobile app.
Bank of America
Bank of America is another widely used bank that offers free FICO scores to consumers. However, to enroll in this program, you must be a Bank of America credit card customer.
Much like Discover’s offering that we described above, Bank of America’s FICO Score Program provides customers not only with their FICO scores but also information on the major factors that influence your credit score, your month-to-month credit score history, and education about how to achieve and maintain good credit.
On top of this, Bank of America also compares your credit score to the national average.
Bank of America customers can view their FICO score for free on the company’s website or mobile app.
Citibank
Consumers who have Citibank branded credit cards can obtain their FICO score for free from Citi.
Citi states on their website, “We think it’s important to provide our cardmembers with free access to information that will help them understand and stay on top of their credit status. That’s why we’re providing you with your FICO® Score and information to help you understand it.”
Your FICO score from Citibank is determined using information from your Equifax credit report and the FICO Bankcard Score 8 credit scoring model. Unlike the standard version of FICO 8 that you may be used to seeing, which ranges from 300 to 850, the bank card model used by Citi ranges from 250 to 900. It is updated once a month.
You can find more information on Citi’s free FICO score program on their website.
American Express
Recently, American Express started providing access to free FICO scores to consumers who have American Express credit cards.
The bank uses the standard version of FICO 8, so the credit score range spans from 300 to 850. Experian provides the credit report data used to calculate your score.
As with the other free FICO score programs, you also get to see how your FICO score changes over time and you receive a summary of the factors affecting your credit score.
American Express credit cardholders can see their FICO scores in their online account or on their monthly statement.
Those who do not have credit cards with American Express can get their TransUnion VantageScore for free through the company’s MyCredit Guide program, but this does not include FICO scores.
Barclays
FICO scores from TransUnion are available to all Barclays credit card customers through the bank’s online banking system.
Once you have had your Barclays card for three months, you can see a chart of your FICO score history over the time you have had an account open with Barclays, according to SmartAsset.
Plus, Barclays will send you alerts via email if your credit score changes, including an explanation of why your score has changed.
Wells Fargo
Wells Fargo account holders who use their online banking platform can view their FICO credit score within their online account.
Additional features include your credit score history, information on your credit score factors, and personalized credit tips from Wells Fargo.
According to the bank, they offer your FICO score for free in order to “support your awareness and understanding of FICO® Credit Scores and how they may influence the credit that’s available to you.”
The FICO score you get through Wells Fargo is calculated using Experian credit report data and is updated once a month.
Experian
Experian is the only major credit bureau that offers consumers their FICO 8 scores for free along with their Experian credit reports.
In addition, Experian offers an alternative credit data program called Experian Boost, which can add positive payment history from certain bills to your credit report, such as utilities and Netflix.
Sign up on Experian’s website to start using these free services.
Your Local Bank or Credit Union
Not all banks and credit unions offer customers the ability to check their FICO scores for free, but it is worth asking if you do not have access to the previous options. If your local bank or credit union does not offer free FICO scores, they may be able to help direct you toward somewhere that does.
Will Checking Your FICO Score Hurt Your Credit Score?
Although this is a common concern, checking your own credit score should never hurt your credit.
This credit myth likely arises from the fact that hard inquiries on your credit report can have a small negative effect on your score.
However, hard credit inquiries only happen when you are actively seeking credit and a lender has to pull your credit report to decide whether or not to loan you money.
All other credit checks, including those you conduct yourself for educational purposes, are considered to be soft inquiries, which do not affect your score at all.
Final Thoughts on How to Get Your FICO Score for Free
If you want to be able to see your FICO score for free, there are many options available to you, especially if you have credit card accounts with major banks such as those listed above.
FICO also has a program called FICO Score Open Access that aims to enhance consumer access to FICO scores and educate consumers about the topic. FICO has a list of additional lenders and credit and financial counseling organizations that participate in this program, which you can browse in case you do not have any accounts with the banks mentioned here.
Keep in mind that lenders use many different versions of FICO scores, including older generations and versions that are specific to certain industries. That means that when you check your FICO score for free, it is not guaranteed to be the same exact FICO score that a lender will use when you apply for credit.
When you check your FICO score using one or more of the methods in this article, take note of which credit bureau is supplying the information as well as which FICO score version is being used to calculate the result so that there is no confusion if you see a different FICO score somewhere else.
Finally, remember that you can also get your VantageScore for free in many places as well. While it’s not the same as your FICO score, it can still provide educational value as it uses the same general principles to calculate your score.
Let us know if this article helped you find a way to get your FICO score for free by commenting below!
One question we often hear in the tradeline industry is “Do tradelines still work in 2021?”
Fortunately, we can say with certainty that tradelines do still work in 2021, and we are confident they will continue to be effective for years to come.
To explain our answer, we will delve into the history of authorized user tradelines and the policies that regulate the tradeline industry.
Why Do Tradelines Work?
Although the term “tradeline” could refer to any account in your credit file, usually in our industry people use the word as shorthand for authorized user tradelines, or accounts on which you are an authorized user.
Credit card companies allow cardholders to add authorized users (AUs) to their accounts, which are people who are authorized to use the account but are not liable for any charges incurred. For example, a business owner could add an employee as an AU of their credit card, or a parent could add their child.
When someone is added as an AU, often the full history of the account is shown in the credit reports of both the primary user and the AU, regardless of when the AU was added to the account. Therefore, the AU may have years of credit history associated with the account reflected in their file as soon as they are added.
This is why obtaining an AU tradeline through a family member or friend is a common way for people to start establishing a credit history. In fact, studies estimate that 20%-30% of Americans have at least one AU account.
Why are authorized users able to share the benefits of the primary user’s credit rating, even though they are not liable for the debt? This policy is a result of the Equal Credit Opportunity Act of 1974 (ECOA).
Before ECOA was passed, creditors would often report accounts shared by married couples as being only in the husband’s name. This prevented women from building up a credit history and credit score rating in their own names, which in turn prevented them from being able to obtain credit independent of their husbands.
In response to this unequal treatment, ECOA was passed to prohibit discrimination in lending. The federal law made it illegal for creditors to discriminate on the basis of sex, marital status, race, color, religion, national origin, age, or receipt of public assistance.
This means that creditors may not consider this information when deciding whether or not to grant credit to an applicant or determining the terms of the credit.
ECOA was passed in large part to prevent creditors from discriminating against women and to provide equal credit opportunities to women.
Regulation B is a section of ECOA that specifically requires that creditors report spousal AU accounts to the credit bureaus and consider them when lenders evaluate a consumer’s credit history.
Generally, creditors do not distinguish between AUs that are spouses and those that are not when reporting to the credit bureaus, which effectively requires the credit bureaus to treat all AU accounts in the same way.
As a result of this policy, the practice of “piggybacking credit” emerged as a common and acceptable way for individuals with good credit to help their spouses, children, and loved ones build credit or improve their credit.
The practice of piggybacking is the foundation of the tradeline industry. In a piggybacking arrangement, a consumer pays a fee to “rent” an authorized user position on someone else’s tradeline. The age and payment history of that tradeline then show up on the consumer’s credit report as an authorized user account.
Are Tradelines Legal?
It is understandable that there is some confusion about this since not many people are aware of the idea of tradelines for sale, although the practice has been in use for decades.
While Tradeline Supply Company, LLC cannot provide legal advice, we can refer to several official sources, including the Federal Trade Commission, who have indicated that it is legal to buy and sell tradelines.
While tradelines are not illegal, historically, they have not been accessible to everyone. The high cost of tradelines meant that only the wealthy could afford to purchase tradelines for credit piggybacking. Today, however, innovations in the industry have lowered the cost of tradelines, making them affordable to a much wider audience.
Tradeline Supply Company, LLC is proud to be leading the tradeline industry in automating the process of buying and selling tradelines, offering some of the lowest tradeline prices in the industry, educating consumers on the credit system, and making tradelines accessible to everyone.
Our goal is to provide equal opportunities to those who do not have access to authorized user tradelines through friends and family by providing an online platform that allows for a greater network of connections.
But Didn’t Credit Card Piggybacking Get Banned?
Fair Isaac Corporation (FICO), the creator of the widely used FICO credit score, did try to change its scoring model to eliminate the benefits of authorized user tradelines, although they were ultimately unsuccessful. The firm announced that they were planning to devise a way to allow “real” AUs to keep the benefits of their AU tradelines while at the same time discounting the value of AU tradelines for consumers who FICO deemed to be “gaming the system.”
FICO admitted to Congress that they could not legally discriminate between AUs based on marital status due to ECOA.
While this statement understandably caused a lot of concern among consumers of tradelines, as it turns out, FICO was never able to implement this change in their scoring system.
At a congressional hearing in 2008, Fair Isaac’s president admitted that they could not legally distinguish between spousal AUs and other users, because discriminating based on marital status would unlawfully violate ECOA.
After consulting with Congress and multiple federal agencies, FICO was blocked from discriminating against AU account holders. Consequently, all AU accounts are still being considered in FICO 8, the most widely used credit scoring model.
In addition, studies have shown that accounting for AU data helps make credit scoring models more accurate, so it is actually in FICO’s best interest to continue including all AU accounts in their credit scoring models.
In working with thousands of consumers over the years, our results prove that in 2021, AU tradelines still remain an effective way to add information to an individual’s credit report, regardless of the relationship between the primary user and the authorized user.
Here’s another piece of evidence that proves that authorized user tradelines still work in 2021: many banks actually promote the practice of becoming an authorized user for the specific purpose of boosting one’s credit score. To see this for yourself, all you need to do is go to any major bank’s website and search for “authorized user.” You are almost guaranteed to see several articles pop up that talk about becoming an authorized user in order to build a credit history.
How Do We Know Tradelines Will Continue to Work in the Future?
Most widely used credit scoring models still include authorized user “piggybacking” accounts.
Given that FICO has already targeted the tradeline industry before, it makes sense to wonder whether tradelines will still work in the years to come if FICO eventually does succeed in coming up with a way to discriminate against certain AUs.
Thankfully, we can rest assured in knowing that the tradeline business will be around for a long time. The reason that we can be sure of this is that the credit industry is extremely slow to adapt, so even if FICO were to roll out a new credit score model that can tell which AUs purchased their tradelines, it would take years, if not decades, for this new credit score to be adopted across the entire financial industry. Let us explain why this is the case.
Credit scoring is a complicated process, and all lenders have their own guidelines when it comes to underwriting. FICO has many different scoring models, and the specific versions used to evaluate credit applicants vary widely between different industries and even between individual lenders within the same industry.
Currently, the three major credit bureaus (Equifax, Experian, and TransUnion) use the version called FICO 8, which debuted in 2008. Consequently, this is also the version that most lenders use for measuring consumer risk for various types of credit, such as personal loans, student loans, and retail credit cards.
However, according to FICO, the mortgage industry still relies on the much older FICO score models 2, 4, and 5. Auto lenders sometimes use FICO 8, while many still use FICO 2, 4, and 5. Credit card companies may use versions 2, 3, 4, 5, and 8.
As if this isn’t complicated enough, many lenders also use proprietary credit-scoring guidelines specific to their businesses. As FICO’s website says, “It is up to each lender to determine which credit score they will use and what other financial information they will consider in their credit review process.”
As you can see from the wide range of versions used, lenders are extremely slow to adapt to changes in FICO’s credit scoring model. In addition, their underwriting processes have been built around previous versions of FICO. All of the credit score data they have accumulated over time is only accurate for the particular version that was used to calculate it.
Transitioning to a completely new credit score model would require businesses to expend significant resources on updating their technological systems, collecting and analyzing new consumer data, training employees, and possibly incurring financial losses as a consequence of not being able to rely on the consumer data they collected while using older credit score models.
For these reasons, most lenders tend to be very reluctant to introduce the latest FICO credit scoring model.
Lenders use credit scoring models that are specific to their industries, so they tend to resist changing to newer models. Photo by InvestmentZen.
So, even if FICO were to successfully eliminate authorized user data in future credit scoring models, it is likely that it would take years or even decades for lenders to adapt to this change.
In addition, as the 2008 congressional hearing showed, FICO will face pushback from the federal government if they try to eliminate authorized user benefits again. It is highly unlikely that a large company like FICO would want to risk being shut down by the federal government for violating the law.
Consumers wouldn’t stand for it, either. In the Washington Post, J.W. Elphinstone wrote, “Other consumers besides credit renters stand to lose with the change, namely those for whom authorized user accounts were designed… there’s no way to distinguish these from the latest crop of strangers trying to augment their scores. Lenders who want to find out more information about others on credit card accounts are hindered by the Fair Credit Reporting Act and privacy laws.”
Final Thoughts
When FICO took the issue of piggybacking all the way up to Congress in 2008, they made headlines in their fight against the practice.
This was also during the same time that the subprime mortgage meltdown began which preceded the Great Recession. The entire mortgage industry had to be overhauled and many people assumed that the tradeline industry went down along with it.
What did not make headlines is that FICO’s push to do away with the authorized user tradeline industry actually failed due to the government upholding ECOA and the FTC affirming that the practice of buying and selling tradelines is allowed.
The banks themselves even promote credit card piggybacking among friends, family, and co-workers.
FICO, the company behind the creation of the original FICO credit score and its many subsequent iterations, has announced the latest model in their line of credit scoring algorithms: the FICO Score 10 and the FICO Score 10 T. The “T” in the latter scoring model stands for “trended,” which reflects the incorporation of trended data over time into the algorithm.
Thanks to not only the trended data but also a few other major changes, the new scoring models are claimed to be superior to all previous FICO scores.
Although the majority of consumers are not likely to see a dramatic change in their credit scores, some groups of consumers may experience more extreme shifts. Ultimately, the new FICO scores are predicted to widen the gap between consumers with good credit versus those with bad credit.
However, none of that matters until FICO 10 and 10 T actually start being used, which could still be a few years away.
Keep reading to get all the facts on FICO 10, including what makes it different from previous FICO score versions, the impact it will have on credit scores, and when we will start to see lenders adopting it. Most importantly, we’ll tell you how to get a good credit score with FICO 10.
Why Did FICO Come Out With a New Credit Scoring Model?
The whole point of a credit score is to communicate a consumer’s level of credit risk to lenders so that lenders can make less risky decisions when granting credit. Lenders want to avoid extending credit to borrowers who are likely to default on a loan because defaults represent losses for the company.
So, the more accurate a credit scoring model is at predicting consumer credit risk, the more useful it is to lenders. With a predictive credit scoring model, lenders can make more informed lending decisions, which helps their bottom line.
For this reason, the goal of each new credit score is to make it better than the last version at predicting credit risk, and that is exactly what FICO 10 is designed to do.
Consumer Debt Is on the Rise—But So Are Credit Scores
According to The Balance, consumer debt has increased to record levels, and yet the average credit score in the United States has also increased to 706 as of September 2019. This can be attributed partly to economic conditions over time, but there is another major factor that has the banks worried.
The national average FICO score has been on the rise for the past decade and it surpassed the 700 mark in 2018.
It has now been 12 years since the Great Recession of 2008, which means almost all of the delinquencies and derogatory marks on consumers’ credit reports from that period of financial hardship have been removed from their records. Therefore, creditors can no longer see how consumers handled the recession and whether they were able to pay all of their bills when the economy went south.
Couple this with the fear of another possible economic recession on the horizon, and you can understand why lenders have started to feel concerned that delinquencies and defaults may soon begin to rise to a level that is not reflected in consumers’ high credit scores.
Because of these economic factors, the credit scoring system needed an overhaul that would take into account the changing economic climate as well as changing consumer behavior and allow for better predictions of credit risk and default rates.
FICO 10: More Accurate Predictions of Credit Risk
FICO predicts that FICO 10 will lower defaults on auto loans by 9% and defaults on mortgages by 17%.
Due to the changes made to the scoring model that we discussed above, especially the inclusion of trended data for the FICO score 10 T, FICO claims that the new scores perform better than all previous FICO scores by substantially lowering consumer default rates.
Here’s what else FICO has to say about their new products:
“By adopting the FICO® Score 10 Suite, a lender could reduce the number of defaults in their portfolio by as much as ten percent among newly originated bankcards and nine percent among newly originated auto loans, compared to using FICO® Score 9. The reduction in defaults is even higher for newly originated mortgage loans, at 17 percent compared to the version of the FICO Score used in that industry. These improvements in predictive power can help lenders safely avoid unexpected credit risk and better control default rates, while making more competitive credit offers to more consumers.”
How Is FICO 10 Different Than Previous FICO Scores?
Although FICO routinely updates their credit scoring algorithms every five years or so, this will be the first time that they are releasing two different versions of the same general scoring model: FICO 10 T, which uses trended data; and FICO 10, which does not use trended data.
Both FICO 10 and FICO 10 T will be drastically different than the previous FICO score, FICO 9. FICO 9 was designed to be very forgiving to consumers, which led many to believe that it produced credit scores that were higher than they should have been.
With FICO 9, for example, medical collections were given less weight than other types of collections, which was a benefit to consumers struggling with medical debt.
Furthermore, FICO 9 completely ignored paid collection accounts, meaning that if you had a collection on your credit report but then paid the balance, it would no longer affect your credit score. Many felt that this change contributed to FICO 9 overestimating the creditworthiness of consumers, which in turn led to the scoring model not being accepted by many industries.
In contrast, the FICO 10 scores represent a swing back in the opposite direction. It is designed to be less lenient toward consumers with risky credit behaviors in order to avoid understating consumers’ credit risk. In that sense, it is probably more similar to FICO 8 than to FICO 9. However, FICO 10 also rewards consumers who have successfully managed their credit.
To accomplish this, FICO made some significant changes in creating their latest set of credit scoring algorithms.
Trended Data
The new FICO 10 T score is the first FICO score to look at trended credit data.
The FICO 10 T score will incorporate trended data, which means that it will not just consider your credit profile as a “snapshot” in time, but rather, it will take into account your credit behavior over the previous 24 to 30 months and how your credit profile has changed in that time.
VantageScore 4.0, a competing credit scoring model, has been using trended data since it debuted in 2017. Now, FICO is following suit with their 10 T score.
Because of the more extensive temporal data set FICO 10 T has to draw from, it is even more predictive of a borrower’s credit risk than the basic FICO 10 score, which can only see a “snapshot” of your credit report at a given point in time.
For consumers, the trended data factor is especially significant for the credit utilization portion of your credit score. Of course, credit scores already looked at your payment history from the past seven to 10 years, but until now, they only looked at your credit utilization ratios at a given point in time.
This means that with most credit scoring models, even if you max out your credit cards one month and your credit score suffers as a result, as long as you pay down your cards again by the next month, your score can still bounce right back to where it was before you maxed out the card.
With FICO score 10 T, however, it won’t be so easy to recover from high balances, because a record of being maxed out could stick around for the next 24 to 30 months.
In addition, if your balances have been climbing higher over the last two years or if you have been seeking credit more aggressively, you could be penalized by FICO 10 T, because this kind of behavior indicates a higher risk of you defaulting in the future.
On the other hand, if you have been managing your credit well and your debt levels have been decreasing over the past two years, you will be rewarded for that behavior.
Personal loans from online lenders have exploded in popularity, but it’s best to avoid them if you want to get a high FICO 10 credit score.
Personal Loans Will Be Penalized
The vice president of scores and analytics at FICO, Joanne Gaskin, has said that the most significant change to the scoring algorithm is the way it treats personal loans.
Personal loans are growing faster than any other type of consumer debt, even credit cards. Consumers are turning to personal loans to consolidate credit card debt more frequently than in the past, and the proliferation of financial technology companies has made personal loans easier to qualify for and more accessible.
With older FICO models, personal loans are treated the same as any other installment loan. Since the balances of installment accounts don’t affect credit scores as much as the utilization ratios of your revolving accounts, with most scoring models, taking out a personal loan to consolidate credit card debt (essentially converting revolving debt into installment debt) would benefit a consumer’s credit score.
However, many consumers who take out personal loans to pay off revolving debt don’t change the spending habits that got them into debt in the first place. Consequently, after getting a personal loan and paying down their credit cards, they may run up their cards again and find themselves even deeper in debt.
According to FICO, the credit risk of such consumers is higher than you would think based on their credit scores using previous FICO models. To account for this, FICO 10 is treating personal loans as their own category of credit accounts and is potentially penalizing consumers for taking out personal loans.
With FICO 10 T, recent missed payments will matter even more than they already do with other FICO score versions.
Therefore, with FICO 10, the strategy of consolidating credit card debt with a personal loan might not help your credit score as much as you hope and might even hurt it. However, the negative impact of taking out a personal loan can be mitigated by steadily working to reduce your overall debt level.
On the other hand, if your overall debt load stays the same or continues to increase after you take out a personal loan, that could hurt your credit score because it shows lenders that you are getting deeper into debt and not managing your credit well.
Recent Missed Payments Will Be Penalized More Heavily
Payment history has always been the most important part of a FICO credit score, but it is even more important with FICO 10 T, the trended data score.
Using historical data, it can assign late and missed payments even more weight based on your behavior in the past 24 months. For example, if you’ve been getting progressively farther behind on payments over time, the negative impact on your credit score could be even greater than it would with a previous FICO score.
If you have delinquencies that are at least a year old, though, then those older negative marks on your credit report won’t hurt your score as much, according to MSN.
How Will the FICO 10 Scoring Model Affect Credit Scores?
Overall, it is predicted that the new FICO 10 scoring models will have a polarizing effect on consumers’ credit scores, which means that some consumers who have bad credit scores may see them drop even further, while those who have good credit scores because they are on the right track may be rewarded with even higher scores.
40 million consumers are likely to experience a credit score drop of 20 or more points with FICO 10 compared to previous models. This could push some consumers over the edge into a lower credit rating category.
FICO has estimated that approximately 100 million consumers will probably experience minor changes of less than 20 points to their scores. The company also estimates that about 40 million consumers will see their credit scores drop by 20 or more points, while another 40 million could see their scores increase by the same amount.
You are likely to see a credit score drop if you took out a personal loan to consolidate debt but then kept accruing more debt instead of paying it off, or if you have credit card debt that you are not paying down.
You are most likely to see a credit score increase if you have been penalized for having high balances from time to time, since the temporal data from FICO 10 T will help to average out the peaks in your utilization rate.
While a decrease of 20 points in your credit score isn’t catastrophic, it could be enough to make a difference in your chances of being approved for credit or the interest rates you could qualify for. This is especially true for those whose credit scores sit near the lower border of a credit score category.
For example, if someone with a credit score of 595 with FICO 8 is considered to have fair credit. If FICO 10 gave them a credit score that is 20 points lower, their credit score would be 575, which is considered bad credit. That could very well make or break your chances of getting approved for a loan or a credit card.
On the other hand, the inverse is true for those who stand to gain 20 points. If a 20 point increase pushes a consumer over the edge from fair credit to good credit, for example, this could certainly be beneficial when applying for credit.
It’s estimated that 80 million consumers will see a significant change in their credit scores with FICO 10, which may move them into different credit score ranges.
Less Severe Score Fluctuations
As you may recall from How to Choose a Tradeline, the more data there is contributing to an average, the more difficult it is to affect that average.
Since FICO 10 T looks at your credit utilization for an extended period of time instead of just the current month, it is likely that your credit score will not change as drastically from month to month based on your utilization ratios at the time.
In other words, your utilization data from the past 24 to 30 months will have a stabilizing effect on your score that will protect it from being heavily penalized if you occasionally have high balances. For example, if you spend extra on your credit cards in December to prepare for the holidays, your score that month won’t be hurt as much as it would without the trended data (as long as you pay it off quickly).
Greater Emphasis on Trends and Recent Data
FICO 10 T will especially reward consumers who have a trend of improving their credit over time.
The inclusion of trended data with FICO Score 10 T and extra emphasis on recent data means that your credit score is not based solely on what your accounts look like today, but instead, it will give more importance to whether your credit is getting better or getting worse.
Hypothetically, it’s possible that two consumers with the same amount of debt and derogatory items could have different credit scores based on the trend in their debt levels.
If one consumer has $10,000 of credit card debt, but they have been making progress on paying that down from a starting point of $20,000 of debt, then their credit score would be helped by FICO 10 T because their debt level is demonstrating a trend of improvement over time.
If the other consumer also has $10,000 of credit card debt, but they used to only have $1,000 of revolving debt, that trend shows that they are getting deeper into debt, and their FICO 10 score would be hurt by that pattern of increasing debt.
A Polarizing Effect on Credit Scores
One of the major effects of FICO 10 is that it is likely going to polarize the pool of consumers’ credit scores. In other words, those near the top of the credit score range will get even higher, while those with low credit scores will sink even lower along the scale.
According to CNBC, consumers with scores of lower than 600 will experience the largest reductions in their credit scores with FICO 10. Those with scores of 670 and above could possibly gain up to 20 points.
This creates a distribution of credit scores that is more concentrated at the two extremes, as opposed to most consumers’ credit scores being concentrated around the average.
Unfortunately, that means the negative effects of the new FICO scores will disproportionately impact consumers who are already struggling with debt. This will make it even harder for consumers to get out of debt and may force them to seek out costly, predatory loans, which only accelerates the downward spiral of debt.
This perpetuation of inequality in the credit scoring system is not new, but it seems that FICO 10 will only serve to increase credit inequality rather than improve it.
Ultimately, FICO’s clients are the banks, and their products are designed to give banks the upper hand, not consumers.
When Will the New FICO Score Be Rolled Out?
By widening the divide between consumers with good credit and those with bad credit, it seems that FICO 10 will exacerbate credit inequality.
According to FICO, the FICO Score 10 Suite of products will be available in the summer of 2020. The vice president of scores and predictive analytics at FICO, Dave Shellenberger, told The Balance that Equifax will be adopting the new score shortly thereafter.
As to when lenders will actually start to use the new credit scoring system, that is a different question.
Lenders Are Slow to Adapt to New Credit Scoring Systems
The financial industry adapts very slowly to systemic changes. As we discussed in “Do Tradelines Still Work in 2020?”, there are many, many different versions of FICO, and the majority of lenders are still using versions of the score that are years or even decades old.
Before FICO 10, the latest version had been FICO 9, which has largely gone unused by lenders.
FICO 8 is the credit scoring model that is currently being used by the three major credit bureaus and it is also the most widely used model among lenders today. FICO 8 debuted in 2009, which means it has now been around for over a decade.
There are certain industries that rely heavily on FICO score versions that are even older than FICO 8. In the mortgage industry, the most popular FICO scores are versions 2, 4, and 5, the earliest of which debuted in the early 1990s. Auto lenders may use FICO scores 2, 4, 5, or 8, while credit card issuers use models 2, 3, 4, 5, and 8.
Furthermore, many industries and even some large lenders have their own proprietary FICO scoring models which have been customized for that particular institution and the consumer base they serve.
Lenders have amassed huge troves of data based on a specific credit scoring model. Having reliable data is crucial to minimizing risk during the underwriting process. If lenders were to change to a new scoring model, all of the credit scoring information they have collected so far would no longer be applicable, since it was calculated using a different algorithm.
It is likely that the FICO 10 T score will take longer to implement than the basic FICO 10 score because FICO 10 T will require businesses to train employees to use a new set of reason codes.
They would essentially be starting from scratch, which would mean taking on more risk until they have tested the new model for long enough to understand how it works for their businesses. Because of this, lenders are often reluctant to upgrade to a newer scoring model and slow to implement it.
Therefore, we can make an educated guess that it will most likely take at least a few years for FICO 10 to gain traction with lenders on a large scale. According to Shellenberger of FICO, it may take “up to two years” before lenders start using the new model, although based on past examples, it seems likely that it could take a lot longer than that.
FICO 10 T Will Be More Challenging for Lenders to Adopt
According to FICO, the standard FICO 10 score uses the same “reason codes” as older FICO scores. Reason codes, also referred to as “adverse action codes,” are the codes that lenders must provide if they have rejected your application for credit based on information from your credit report. These codes usually consist of a number and a brief statement of something that is impacting your score in a negative way, such as revolving account balances that are too high compared to your revolving credit limit.
Because FICO 10 shares the same reason codes with previous versions of FICO scores, this means it will be compatible with lenders’ current systems, at least with regard to reason codes.
In contrast, FICO 10 T comes with a new set of reason codes, which means it will be a more extensive undertaking for banks to implement the new score and train employees on how to use it.
For this reason, it seems likely that the basic version FICO 10 may see widespread use among lenders before FICO 10 T does.
How to Get a Good FICO 10 Credit Score
Although some significant changes have been made to the FICO 10 credit scoring products, the overall principles of managing credit remain the same. Most importantly, make all of your payments on time, every time, and try to keep your credit utilization low.
However, there are a few specific points to keep in mind if you want to get a good credit score with FICO 10.
Think twice about taking out a personal loan
Since personal loans will be more heavily penalized with FICO 10 scores, you’ll want to avoid taking out a personal loan unless it’s absolutely necessary. Instead of relying on personal loans to support your spending, try to save up for large purchases in advance, and start funneling some cash from each paycheck into an emergency fund in case you run into financial hardship.
If you do end up needing to use a personal loan, try to pay it down as quickly as you can. In addition, don’t run up the balances on your revolving accounts again, because the FICO 10 T algorithm does not reward this behavior, and your credit score will reflect that.
Consider setting up automatic payments for all of your accounts so that you never accidentally miss a payment.
Never miss a payment
Avoiding late or missed payments is of the utmost importance with any credit score, but it is even more important with the new FICO scoring system. Late and missed payments may be assigned more weight based on your recent credit history, especially missed payments that occurred within the past two years.
To avoid missing any payments, set up all of your accounts to automatically deduct at least the minimum payment from your bank account before your due date each month. Also, it’s a good idea to get into the habit of checking your accounts regularly to make sure there haven’t been any errors or issues with processing your automatic payments.
If you do accidentally miss a payment, pay the bill as soon as you notice and consider asking your lender to waive the late fee. If you manage to catch up before 30 days have gone by, then you can avoid getting a derogatory item added to your credit report.
In the event that you find yourself with a 30-day late (or worse) on your credit report, then you will need to be extra vigilant about making payments on time for at least the next one to two years if you want your score to recover.
Pay off your credit cards in full every month
Paying off your credit cards in full is always a good idea in general because that way, you can avoid wasting money on interest fees. In addition, paying off your full balance each month prevents your credit utilization from increasing from month to month, as opposed to carrying over a balance and then adding more to it each month.
With trended data playing a large role in your FICO 10 T score, consistency is key, and paying your bills in full every time will help boost your score.
If you want to get a good credit score with FICO 10 and FICO 10 T, try to keep your revolving debt low by paying off your credit cards in full every month.
Lower your credit utilization ratios
With FICO 10 T, it will be more important than ever to be vigilant about maintaining a low credit utilization ratio. Since the trended scoring model accounts for patterns in your credit utilization over the past 24 months, it won’t be so easy to get away with maxing out your credit cards one month and then quickly paying the balance down to improve your score again the next month.
High credit utilization at any point in the past two years could be factored into your credit score, especially if your utilization has been increasing over time.
For this reason, if your credit is being scored with the FICO 10 T model, you’ll get the best results if your credit utilization has been consistently low or if it has shown a pattern of decreasing over time.
However, just because you pay off your credit card in full every month doesn’t mean it will report a zero balance. The balance that reports to the credit bureaus is the balance that you have at the end of your statement period. If your balance happens to be high on that date, then it could negatively affect your score, even if you pay off the balance soon after.
One way to get around this is to pre-pay your credit card bill before your due date and your statement closing date. That way, the balance will be low when the card reports to the credit bureaus, which is better for your credit score.
Another helpful credit hack is to spread out multiple smaller payments throughout the month so that the balance never climbs too high to begin with.
Requesting a credit line increase can be an easy way to improve your utilization rate, but this method should be used with caution if you think it might encourage you to rack up more debt.
Increase your credit limit
One way to easily lower your utilization rate is to increase your credit limit. Spending $1,000 on a card with a credit limit of $5,000 is a lot better than spending the same amount on a card with a credit limit of $2,000.
Increasing your credit limit might be easier than you think. It could be as simple as calling up your card issuer on the phone or applying for a credit line increase online. Most people who ask for a higher credit limit get approved, according to creditcards.com.
However, this strategy is not encouraged for consumers who may be tempted by the higher credit limit to spend even more on the card.
For tips on how to get a larger credit limit, as well as some pitfalls to watch out for before requesting an increase, check out “How to Increase Your Credit Limit.”
Work to improve your credit health over time
With FICO score 10 T including more information about your credit history over the past 24 months, it will be important to demonstrate an improvement in your credit over time. Consumers who have been working to manage their credit responsibly and who have reduced their amount of revolving debt over time will be rewarded.
On the other hand, those whose credit health has been declining due to increasing debt levels or a series of missed payments will see their credit scores take a dive.
Will the New FICO 10 Score Affect the Tradeline Industry?
First, remember that it’s likely that it’s going to take at least a few years for FICO 10 to be widely adopted by lenders (if lenders choose to use it in the first place, which they may not), which means that nothing is changing for the tradeline industry in the near future.
Secondly, many lenders may choose to adopt only FICO 10 and not FICO 10 T because it will be technically easier to implement. For lenders using FICO 10 without the trended data, there is no change to how authorized user tradelines work.
However, things get more interesting when considering the impact of FICO 10 T on buyers and sellers of tradelines. Until FICO 10 T is adopted by major lenders, we can only speculate as to the changes that will result, but here is one possibility.
What If FICO 10 T Reveals a Tradeline’s Balance History?
One concern that consumers may have is that FICO 10 T will expose a tradeline’s previous high balance if it had one at any point during the past 24 to 30 months. That may be true, but we also know that FICO 10 T places a lot of importance not just on the numbers themselves, but on how they change over time.
All of the tradelines on our tradeline list are guaranteed to have a utilization ratio of 15% or lower. If a tradeline had a higher balance at some point in the past two years or so, then it would show a trend of the balance decreasing, since the balance would have been brought down to under 15% in order to participate in the tradeline program.
FICO 10 T rewards downward trends in utilization, so it seems that authorized user tradelines would still provide value even if higher balances can be seen in the past.
If a tradeline has not had a high balance in the past two years, then that means it will show a pattern of consistently low utilization, which is also beneficial.
Conclusion: What Does the New FICO 10 Credit Score Mean for Consumers?
A lot of speculation and bold claims have been circulating about the new FICO scores, FICO 10 and FICO 10 T. Naturally, consumers and tradeline sellers alike are concerned with the question of how these new scores might affect authorized user tradelines.
It is true that FICO has made some significant changes to their latest credit scoring model, and it’s also likely that some consumers may experience marked increases or decreases in their credit scores compared to previous FICO scoring models. Fortunately, however, there is no need to panic.
Follow the general guidelines of good credit to get a high score with any credit scoring model.
First, let’s remember that FICO 10 is not in use yet, and it’s probably going to take a few years or more for the majority of lenders to adopt it. In addition, the scoring model that people are most concerned about, FICO 10 T, will take even longer than FICO 10 to reach mainstream popularity since it requires lenders to learn how to start using a new set of reason codes.
For this reason, consumers do not need to worry about lenders seeing the past two years of their credit histories just yet. However, knowing that widespread use of trended data may be on the horizon, you may want to start preparing your credit now. That way, when trended data credit scores become more popular, your credit will be strong and ready to withstand the changes.
To achieve a high credit score with FICO 10 and FICO 10 T, avoid taking out personal loans if you can, as they will be penalized more heavily than in the past. It’s also important to demonstrate either an improvement in your credit over time or consistently good credit habits, which will be rewarded.
Aside from these special considerations, FICO 10 and FICO 10 T still rely primarily on the same credit score factors you are already familiar with: payment history, credit utilization, length of credit history, credit mix, and new credit. While the peripheral details of different scoring models may vary, the core components always remain the same.
Ultimately, if you work on developing good credit practices in these general areas, your credit will be in great shape no matter which scoring model is used.
One question we often hear is “Do tradelines still work in 2020?”
Fortunately, we can say with certainty that tradelines do still work in 2020, and we are confident they will continue to be effective for years to come.
To explain our answer, we will delve into the history of authorized user tradelines and the policies that regulate the tradeline industry.
Why Do Tradelines Work?
Although the term “tradeline” could refer to any account in your credit file, usually in our industry people use the word as shorthand for authorized user tradelines, or accounts on which you are an authorized user.
Credit card companies allow cardholders to add authorized users (AUs) to their accounts, which are people who are authorized to use the account but are not liable for any charges incurred. For example, a business owner could add an employee as an AU of their credit card, or a parent could add their child.
When someone is added as an AU, often the full history of the account is shown in the credit reports of both the primary user and the AU, regardless of when the AU was added to the account. Therefore, the AU may have years of credit history associated with the account reflected in their file as soon as they are added.
This is why obtaining an AU tradeline through a family member or friend is a common way for people to start establishing a credit history. In fact, studies estimate that 20-30% of Americans have at least one AU account.
Why are authorized users able to share the benefits of the primary user’s credit rating, even though they are not liable for the debt? This policy is a result of the Equal Credit Opportunity Act of 1974 (ECOA).
Before ECOA was passed, creditors would often report accounts shared by married couples as being only in the husband’s name. This prevented women from building up a credit history and credit score rating in their own names, which in turn prevented them from being able to obtain credit independent of their husbands.
In response to this unequal treatment, ECOA was passed to prohibit discrimination in lending. The federal law made it illegal for creditors to discriminate on the basis of sex, marital status, race, color, religion, national origin, age, or receipt of public assistance.
This means that creditors may not consider this information when deciding whether or not to grant credit to an applicant or determining the terms of the credit.
ECOA was passed in large part to prevent creditors from discriminating against women and to provide equal credit opportunities to women.
Regulation B is a section of ECOA that specifically requires that creditors report spousal AU accounts to the credit bureaus and consider them when lenders evaluate a consumer’s credit history.
Generally, creditors do not distinguish between AUs that are spouses and those that are not when reporting to the credit bureaus, which effectively requires the credit bureaus to treat all AU accounts in the same way.
As a result of this policy, the practice of “piggybacking credit” emerged as a common and acceptable way for individuals with good credit to help their spouses, children, and loved ones build credit or improve their credit.
The practice of piggybacking is the foundation of the tradeline industry. In a piggybacking arrangement, a consumer pays a fee to “rent” an authorized user position on someone else’s tradeline. The age and payment history of that tradeline then show up on the consumer’s credit report as an authorized user account.
Are Tradelines Legal?
It is understandable that there is some confusion about this since not many people are aware of the idea of tradelines for sale, although the practice has been in use for decades.
While Tradeline Supply Company, LLC cannot provide legal advice, we can refer to several official sources, including the Federal Trade Commission, who have indicated that it is legal to buy and sell tradelines.
While tradelines are not illegal, historically, they have not been accessible to everyone. The high cost of tradelines meant that only the wealthy could afford to purchase tradelines for credit piggybacking. Today, however, innovations in the industry have lowered the cost of tradelines, making them affordable to a much wider audience.
Tradeline Supply Company, LLC is proud to be leading the tradeline industry in automating the process of buying and selling tradelines, offering some of the lowest tradeline prices in the industry, educating consumers on the credit system, and making tradelines accessible to everyone.
Our goal is to provide equal opportunities to those who do not have access to authorized user tradelines through friends and family by providing an online platform that allows for a greater network of connections.
But Didn’t Credit Card Piggybacking Get Banned?
Fair Isaac Corporation (FICO), the creator of the widely used FICO credit score, did try to change its scoring model to eliminate the benefits of authorized user tradelines, although they were ultimately unsuccessful. The firm announced that they were planning to devise a way to allow “real” AUs to keep the benefits of their AU tradelines while at the same time discounting the value of AU tradelines for consumers who FICO deemed to be “gaming the system.”
FICO admitted to Congress that they could not legally discriminate between AUs based on marital status due to ECOA.
While this statement understandably caused a lot of concern among consumers of tradelines, as it turns out, FICO was never able to implement this change in their scoring system.
At a congressional hearing in 2008, Fair Isaac’s president admitted that they could not legally distinguish between spousal AUs and other users, because discriminating based on marital status would unlawfully violate ECOA.
After consulting with Congress and multiple federal agencies, FICO was blocked from discriminating against AU account holders. Consequently, all AU accounts are still being considered in FICO 8, the most widely used credit scoring model.
In addition, studies have shown that accounting for AU data helps make credit scoring models more accurate, so it is actually in FICO’s best interest to continue including all AU accounts in their credit scoring models.
In working with thousands of consumers over the years, our results prove that in 2020, AU tradelines still remain an effective way to add information to an individual’s credit report, regardless of the relationship between the primary user and the authorized user.
Here’s another piece of evidence that proves that authorized user tradelines still work in 2020: many banks actually promote the practice of becoming an authorized user for the specific purpose of boosting one’s credit score. To see this for yourself, all you need to do is go to any major bank’s website and search for “authorized user.” You are almost guaranteed to see several articles pop up that talk about becoming an authorized user in order to build a credit history.
How Do We Know Tradelines Will Continue to Work in the Future?
Most widely used credit scoring models still include authorized user “piggybacking” accounts.
Given that FICO has already targeted the tradeline industry before, it makes sense to wonder whether tradelines will still work in the years to come if FICO eventually does succeed in coming up with a way to discriminate against certain AUs.
Thankfully, we can rest assured in knowing that the tradeline business will be around for a long time. The reason that we can be sure of this is that the credit industry is extremely slow to adapt, so even if FICO were to roll out a new credit score model that can tell which AUs purchased their tradelines, it would take years, if not decades, for this new credit score to be adopted across the entire financial industry. Let us explain why this is the case.
Credit scoring is a complicated process, and all lenders have their own guidelines when it comes to underwriting. FICO has many different scoring models, and the specific versions used to evaluate credit applicants vary widely between different industries and even between individual lenders within the same industry.
Currently, the three major credit bureaus (Equifax, Experian, and TransUnion) use the version called FICO 8, which debuted in 2008. Consequently, this is also the version that most lenders use for measuring consumer risk for various types of credit, such as personal loans, student loans, and retail credit cards.
However, according to FICO, the mortgage industry still relies on the much older FICO score models 2, 4, and 5. Auto lenders sometimes use FICO 8, while many still use FICO 2, 4, and 5. Credit card companies may use versions 2, 3, 4, 5, and 8.
As if this isn’t complicated enough, many lenders also use proprietary credit-scoring guidelines specific to their businesses. As FICO’s website says, “It is up to each lender to determine which credit score they will use and what other financial information they will consider in their credit review process.”
As you can see from the wide range of versions used, lenders are extremely slow to adapt to changes in FICO’s credit scoring model. In addition, their underwriting processes have been built around previous versions of FICO. All of the credit score data they have accumulated over time is only accurate for the particular version that was used to calculate it.
Transitioning to a completely new credit score model would require businesses to expend significant resources on updating their technological systems, collecting and analyzing new consumer data, training employees, and possibly incurring financial losses as a consequence of not being able to rely on the consumer data they collected while using older credit score models.
For these reasons, most lenders tend to be very reluctant to introduce the latest FICO credit scoring model.
Lenders use credit scoring models that are specific to their industries, so they tend to resist changing to newer models. Photo by InvestmentZen.
So, even if FICO were to successfully eliminate authorized user data in future credit scoring models, it is likely that it would take years or even decades for lenders to adapt to this change.
In addition, as the 2008 congressional hearing showed, FICO will face pushback from the federal government if they try to eliminate authorized user benefits again. It is highly unlikely that a large company like FICO would want to risk being shut down by the federal government for violating the law.
Consumers wouldn’t stand for it, either. In the Washington Post, J.W. Elphinstone wrote, “Other consumers besides credit renters stand to lose with the change, namely those for whom authorized user accounts were designed… there’s no way to distinguish these from the latest crop of strangers trying to augment their scores. Lenders who want to find out more information about others on credit card accounts are hindered by the Fair Credit Reporting Act and privacy laws.”
Final Thoughts
When FICO took the issue of piggybacking all the way up to Congress in 2008, they made headlines in their fight against the practice.
This was also during the same time that the subprime mortgage meltdown began which preceded the Great Recession. The entire mortgage industry had to be overhauled and many people assumed that the tradeline industry went down along with it.
What did not make headlines is that FICO’s push to do away with the authorized user tradeline industry actually failed due to the government upholding ECOA and the FTC affirming that the practice of buying and selling tradelines is allowed.
The banks themselves even promote credit card piggybacking among friends, family, and co-workers.
Myths and misinformation about credit scores, credit reports, and credit repair are extremely common. Unfortunately, many people believe these myths, and their credit suffers as a result of taking incorrect actions.
Let’s get to the bottom of these credit myths and learn the truth about them so you can start improving your credit the right way.
Myth: Everyone automatically has a credit score. Fact: 1 in 5 adults in the United States do not have credit scores.
A report by the Consumer Financial Protection Bureau (CFPB) found that one-fifth of adults in the United States do not have enough credit data to calculate a credit score by traditional methods. These consumers are called “credit invisibles.”
Low-income consumers are particularly susceptible to credit invisibility due to lack of access to traditional credit products. Some consumers may be credit invisible for other reasons, such as a voluntary decision not to use credit.
For those that do not use credit for whatever reason, it is likely that they do not have enough of a credit history to generate a credit score.
Consumers that are credit invisible may be able to generate a credit record by piggybacking on the good credit of others, but don’t assume that everyone has a credit score just by virtue of existing.
Myth: Checking your credit report will hurt your credit score. Fact: Checking your own credit will not hurt your score.
Checking your own credit report results in what is known as a “soft pull,” which means the inquiry does not affect your credit score.
Myth: Your income affects your credit score. Fact: Your credit score does not look at your income.
However, your income can affect your credit indirectly in that it influences the “five C’s” that have been shown to predict credit performance: capacity to pay off debts, the collateral backing a loan, capital available to repay a loan, conditions that affect income and expenses, and the character of the borrower.
Your capacity to pay off debts as well as the collateral and capital they have available to repay loans may all have a relationship with your income.
That’s a big part of the reason why low-income consumers are 8 times more likely than high-income consumers to have no credit score at all. In consumers that do have credit scores, those who reside in low-income areas have lower credit scores. In addition, low-income consumers are 240 percent more likely to have their credit file originated due to derogatory items such as collections.
So while your income is not technically incorporated into your credit score, it can definitely influence your ability to repay debts, which is the basis of a credit score.
Myth: You only have one credit score.
Each consumer can have dozens of different credit scores.
FICO 8 is the credit score most commonly by lenders today, but in some industries, older models or industry-specific models are used instead. For example, there are FICO scores tailored specifically toward auto loans and credit cards, and mortgage lenders are known to use the older FICO score versions 2, 4, and 5. Plus, FICO scores are different for each credit bureau.
VantageScore, which is increasingly used by some lenders as well as for consumer credit education, also has a few versions. The latest version is VantageScore 4.0, but VantageScore 3.0 is still the most commonly used version today.
Altogether, between the many versions of FICO scores and VantageScores, consumers can have dozens of different credit scores.
Myth: Paying half of your minimum payment twice a month counts as two full payments and tricks the system into giving you twice the credit score boost. Fact: Dividing your bill in half and making two payments is the same as paying the full amount once.
This credit myth is unfounded yet often repeated.
If this “credit hack” sounds a little too good to be true, that’s because it is. It is simply not true that you can “trick the system” into thinking you have made two full payments by making two half payments.
Making a payment on a credit account affects two main factors of your credit score: payment history and credit utilization. Let’s discuss each factor individually.
When it comes to your payment history, making a partial payment that is less than the minimum amount due does not satisfy the requirement and will not count as an on-time payment. Only once you have made the second payment for the other half of the amount due will you have satisfied the requirement to be considered paid on time. Therefore, you do not gain any extra benefit to your payment history from dividing your payment into two parts instead of paying the full amount at one time.
As an example, let’s say you have a bill due on the 30th and the minimum amount you must pay is $50. We have laid out the two payment scenarios in the table below.
Scenario 1: Pay the full amount in one payment Scenario 2: Make half of the payment twice
Date Amount Paid Payment Status Date Amount Paid Payment Status
15th
15th $25 Insufficient payment—$25 still due
30th $50 Paid on time 30th $25 Paid on time
As you can see from the table, in both scenarios, you only get the benefit of paying your bill on time once per billing cycle, not twice.
Now let’s discuss the utilization factor. Continuing with the same example, the total amount you are paying toward the account is $50 in both scenarios. Therefore, the overall improvement in your utilization ratio is going to be the same either way.
Now, if the reporting date for that account is in between the first and second payments, since you have already sent a partial payment, you may temporarily get a small boost from having a slightly lower utilization ratio when the account reports to the credit bureaus. But at the end of the billing cycle, the result will be the same.
If you don’t have any credit history, you can being building credit by piggybacking on someone else’s good credit.
If you decide to make extra payments in addition to your minimum payment, which is ideally what all responsible borrowers should be doing, that can certainly help your credit score by speeding up your debt repayment. But simply splitting the minimum payment into two payments won’t do anything to boost your score.
Myth: If you don’t have credit history, you’ll never be able to get credit. Fact: You can start building credit by piggybacking.
While it can definitely be more difficult to get credit when you don’t have any credit history to begin with, it’s not impossible. There are credit products out there designed for people with no credit or bad credit, such as secured credit cards and credit-builder loans.
Another way to start building credit fast is by piggybacking off of the good credit of someone else. You could have someone you trust cosign on a loan or open a joint account with you, or you could become an authorized user on someone else’s seasoned tradeline.
If you are not lucky enough to know someone who has a seasoned account with perfect payment history that they could add you to, consider purchasing tradelines from a reputable tradeline company.
Myth: Paying off a collection will “re-age” the debt because the account falls off your credit report based on the date of last activity. Fact: Collections fall off your credit seven years after the initial delinquency and cannot legally be re-aged.
It is illegal to “restart the clock” on collections.
If you’ve read our article about collections on your credit report, then you know that it is the date of first delinquency (DOFD) that determines when the collection will be removed from your credit report, not the “date of last activity” (DLA).
The reason why some people may believe this myth is because shady debt collectors sometimes illegally change the date of first delinquency to the date of last activity in an attempt to re-age the debt.
As we said, this practice is illegal. If you notice that a debt collector has improperly changed any information about a collection account on your credit report, you have the right to dispute the inaccurate information.
Myth: Paying off a collection will boost your credit score. Fact: Paying off a collection may or may not raise your score depending on which credit score is used.
While it makes sense to assume that paying off a collection should increase your credit score, that is not always the case. In fact, more often than not, this is not the case, although it depends on which credit score is being used.
With FICO 8 and all previous FICO scores, both paid and unpaid collections are categorized as major derogatory items on your credit report. Therefore, paying off the account will not change how it is considered by the credit scoring algorithm, which means your score may not go up at all.
On the other hand, FICO 9, VantageScore 3.0, and VantageScore 4.0 ignore paid collection accounts, so your score should recover after paying off a collection if one of these credit scoring models is being used.
Myth: You should close accounts you’re not using. Fact: You should keep accounts open and use them periodically.
While you might think that closing accounts you don’t need will help your credit score, the opposite is actually true, especially when it comes to revolving accounts such as credit cards.
The main reason for this is that credit utilization is an important part of your credit score, and closing credit card accounts will hurt your utilization ratio by decreasing your credit limit.
It could also hurt your mix of credit, although that’s a less important factor.
In addition, payment history is the number one factor that helps your score. It’s better for your credit to keep the account open, use it for small purchases here and there or a monthly subscription, and pay it off every month to keep building more positive payment history.
The exception to this is if an account comes with an annual fee that’s no longer worth the price or if you can’t resist the temptation to overspend.
Myth: Closed accounts don’t affect your credit. Fact: Closed accounts can have a significant impact on your credit.
Although we just discussed why you shouldn’t necessarily close old accounts, that’s not to say that closed accounts don’t impact your credit. They certainly can, particularly when it comes to your credit age.
Closing an account does not remove its payment history or age from your credit report, so closed accounts still contribute to your credit age. In addition, accounts can continue to age even after they have been closed.
So although it’s best to keep accounts open if you can, having closed accounts on your credit report is not a bad thing. If the account was closed in good standing, it will likely continue to help your credit.
Carrying a balance on your credit cards is expensive and does not help you build credit. Photo by Hloom on Flickr.
Myth: Carrying a balance on your credit cards will help your credit. Fact: Carrying a balance will not help you build credit and it will cost you interest fees.
While it is important to use credit regularly when building credit, it’s not necessary to carry a balance on your credit cards from month to month. If you do this in an attempt to build credit, you will be wasting money by paying unnecessary interest.
The best way to build credit using your credit cards is to use them responsibly and then pay the full balance due each month, or even make multiple payments each month to keep your utilization ratio as low as possible.
Myth: Shopping around for the best rates on a loan will hurt your credit score. Fact: Getting loan estimates from multiple lenders will not hurt your score if you complete the process within a specific time window.
Credit scoring algorithms understand that it’s smart to shop around for the best rates on a loan, not risky. Therefore, credit scores typically have ways of preventing the series of multiple inquiries that result from this process from hurting your score excessively.
If you are applying for student loans, mortgages, or auto loans, FICO scores allow a certain time frame for you to shop around, only counting one hard inquiry to your credit report for this time period. For older FICO scores, the time window is 14 days; for newer FICO scores, the time window is 45 days.
In addition, FICO scores have a 30-day hard inquiry “buffer,” meaning that the algorithm ignores any inquiries that occurred within the past 30 days when calculating your score.
VantageScore uses a simpler method: it groups all inquiries made within a 14-day window of each other together and counts those all as one inquiry, regardless of what types of accounts the inquiries were for.
Myth: You can fix your credit by disputing everything on your credit report. Fact: Disputing everything on your credit report could get you in legal trouble and may not even help your credit.
If there is information on your credit report that is inaccurate, outdated, incomplete, or unverifiable, of course you would want to dispute those items with the credit bureaus. But it’s not necessarily a good idea to dispute negative items on your credit report that are accurate.
First of all, the derogatory items won’t necessarily get deleted from your credit report, especially if you don’t provide proof that they are inaccurate. They might just get updated with the correct information, or they may get deleted temporarily until an investigation determines the items are valid and they go right back on your credit report.
Furthermore, the credit bureaus don’t have to investigate disputes that are deemed “frivolous,” and they could decide that some of your disputes are frivolous if you are disputing every item in your credit file, regardless of accuracy.
Plus, lying on a credit dispute could be considered fraudulent. According to the FTC, “No one can legally remove accurate and timely negative information from a credit report.”
Even if you were to get away with disputing everything on your report, this might not necessarily help your credit as much as you hoped. If you’ve gone through an aggressive credit sweep and have nothing left on your report, then you essentially have no credit history and likely no credit score, which could be just as problematic as having bad credit.
Myth: CPN numbers can be used in place of social security numbers to create a new, clean credit file.
Using a CPN to apply for credit is a federal crime. Photo via seniorliving.org.
Fact: CPNs are illegal and using one to apply for credit is a federal crime.
Although you might have heard some people claim that “credit profile numbers” or credit privacy numbers” are a legitimate way to protect your privacy or wipe your credit slate clean, in reality, there is no legitimate or legal source for CPN numbers.
Most of the time, these numbers are either fake social security numbers that have not been created yet or real SSNs that have been stolen from children, the elderly, deceased people, people who are incarcerated, and people who are homeless. Either way, using a CPN means getting involved in identity fraud, which is a federal crime.
Myth: The credit score you check online is the same one lenders see when they pull your credit. Fact: Lenders often do not use the same credit scores that are provided for free online.
When you check your credit score for free online, the credit score you see is most likely going to be a VantageScore. This is the score most commonly used by free online services such as Credit Karma.
The majority of lenders, however, primarily use FICO scores, although some lenders are now starting to use VantageScore. Just keep in mind that the score you see online may not be the same as the score lenders see, as there can often be a significant difference between your VantageScore and your FICO score.
If you want to check your FICO score for free, check with your credit card issuer, since many now offer this service.
Myth: If you don’t have any debt, you will have a good credit score. Fact: You need to use credit to build your credit score.
Having good credit doesn’t just come down to the amount of debt you have—that’s just one part of your credit score. Payment history is the most important part of a credit score, so if you’ve never had debt and you don’t have any payment history, you might not even have a credit score at all.
To get a good credit score, you have to use some form of credit and demonstrate that you can use credit responsibly by building up a positive payment history over time.
Myth: There’s no need to check your credit report until it’s time to apply for a big loan. Fact: It’s important to monitor your credit regularly.
Waiting to check your credit score until you need to apply for credit is a mistake because there could be errors on your credit report bringing your score down. Studies estimate that about one-fifth of consumers have at least one error on their credit report, some of which could be serious enough to result in higher interest rates, less favorable loan terms, or being denied credit.
It’s important to keep an eye on your credit so that you can correct errors and fight fraud as soon as possible instead of waiting until it’s too late.
Myth: A late payment will make your score go down by 50 points. Fact: There is no set amount of points that is associated with any particular item on your credit report.
While it is certainly possible that a 30-day late payment could cause a 50-point drop (or more) in someone’s credit score, this is not always going to be the case. There is no fixed number of points that your score will go up or down by for each item on your credit report. Rather, the way in which a late payment affects your score is always going to depend on your individual credit profile.
There is no set amount of points associated with missing a payment.
Credit scoring algorithms are very complex and they incorporate hundreds of variables, such as how recent the late payment is, whether you have other late payments in your credit history, and how severe the delinquency is, not to mention the myriad other variables associated with the other categories within a credit score.
Because delinquencies on your credit report are always going to be relative to whatever else is in your file, there is a “diminishing returns” effect where the first late payment hurts your score the most and each subsequent late payment tends to have a smaller impact. Someone who has a high credit score and has never missed a payment before is going to experience a severe drop from their first missed payment, whereas someone who already has lates on their record and a lower credit score is going to be hurt less by a subsequent late payment.
According to credit expert John Ulzheimer in a blog article, “Delinquencies, like inquiries, do not have independent value… It is entirely inappropriate and incorrect to say that ‘X’ lowered my score by ‘Y’ points.”
He continues, “The late payment didn’t lower your score but because adding a late payment to a credit report moves other things around it caused your score to be different than it was before the late payment was added. If your score is 50 points lower it’s not as if the new late payment lowered your score 50 points…but because the addition of that item caused a different evaluation of EVERYTHING on your credit reports…the new reality for you is 50 points lower.”
The same principle goes for other items on your credit report as well, not just late payments.
Myth: You don’t have to worry about your kid’s credit. Fact: You should keep an eye on your kid’s credit report, too.
The proliferation of scammers and hackers stealing people’s private information means even your kid’s credit profile could be at risk of identity theft. When people use “credit profile numbers” (CPNs), for example, these numbers are often real social security numbers stolen from children.
Make sure you monitor your kid’s credit in addition to your own.
You don’t want to wait until your child is grown up and ready to apply for credit to realize they have bad credit as a result of identity theft. Consider freezing your kid’s credit to prevent fraudsters from opening accounts in their name.
Myth: Everyone’s credit score is calculated in the same way. Fact: Credit scores have “scorecards” that categorize consumers and score them differently.
You already know that credit scoring algorithms are extremely complex, but what many people don’t know about is the “scorecards” or “buckets” within each credit scoring model. These “buckets” consist of different categories of consumers.
For example, according to John Ulzheimer, “There are scorecards for thin files or those with few accounts, bankruptcy, derogatories, and those with clean credit files… Comparing like populations gives this population an opportunity to be considered based on [the] behavior of that group rather than a comparison to another, better group.”
The credit scoring formula is different for each bucket. In other words, items on your credit report can be treated differently based on which scorecard you fall into.
Sometimes your credit score changes in a way that you don’t expect. For example, perhaps an inaccurate collection account got deleted off of your credit report and your score went down, instead of up. This could be because you changed scorecards as a result of the deletion, causing your credit score to be calculated in a different way. Essentially, you might now be at the bottom of a different bucket instead of at the top of your previous bucket.
It’s always good to keep the concept of scorecards in mind, especially when trying to predict any kind of change to your credit score. You can never guess exactly how your score will change because of all the complexities and trade secrets that go into credit scores.
Conclusions
Unfortunately, there are tons of credit myths out there, and believing them may lead you to mismanage your credit and eventually end up with poor credit. We hope that this article helped to dispel many of the misconceptions about credit and helped you get started on the path to better credit.
What credit myths have you heard of? Did you use to believe any of these? We’d love to hear from you, so share your experience with us in the comments!
If you monitor your credit using a free website, chances are, you’ve seen your VantageScore. However, you may not realize that this credit score is not your FICO score.
So what is a VantageScore credit score and how is it different from a FICO credit score? Is one better than the other? We’ll compare and contrast the two types of credit scores and discuss the merits of each in this article.
What Is a Vantage Credit Score?
The VantageScore credit score, sometimes referred to as a “Vantage credit score,” is a credit scoring model created in 2006 by the three major credit bureaus (Experian, TransUnion , and Equifax) to compete with FICO’s credit scoring models.
VantageScore is a tri-bureau credit score, meaning the exact same model is used at each credit bureau.
The most commonly used version of the VantageScore used by lenders today is the third iteration of the credit scoring model, VantageScore 3.0.
VantageScore Solutions, LLC has released VantageScore 4.0, which is supposed to be more accurate than previous versions, but since it takes lenders a long time to adopt new credit scoring models, most are still using VantageScore 3.0.
Who Uses VantageScore?
According to Experian, VantageScore is used by lenders for all types of loans except mortgages, where FICO is still the dominant player. The largest group of financial institutions that uses VantageScore is credit card issuers.
Non-financial institutions have also increasingly been adopting VantageScore, such as landlords and utility providers.
VantageScore is also widely used by consumer websites that provide educational credit scores and market credit products.
What Is My Vantage Score?
It’s easy to find out what your VantageScore is for free. Credit Karma provides free VantageScore 3.0 credit scores from TransUnion and Equifax, so all you have to do is create an account on creditkarma.com and log in to your Credit Karma account to see your free Vantage credit score.
Credit Sesame and NerdWallet are other sites that provide consumers with free VantageScore 3.0 credit scores from TransUnion.
You can view your free VantageScore with TransUnion and Equifax on Credit Karma.
VantageScore vs. FICO Score
The primary difference between VantageScore and FICO scores is what they are used for.
FICO scores have been in use for a longer period of time and, consequently, are most widely used by lenders to make lending decisions. According to U.S. News, FICO scores are used by 90 percent of “top lenders.”
While VantageScore credit scores are also used by some lenders, they are more well-known for their use as an educational tool.
Both FICO and VantageScore consider the same general categories of information from your credit report (although they use slightly different terms to describe them), which include:
Payment history Utilization Length of credit history/age Mix of accounts/types of credit New credit activity/recent credit
Since the scores share the same general categories, it is safe to assume that they will both be bolstered by the same common sense behaviors that lead to good credit, such as not using too much of your available credit and not missing payments.
However, FICO and VantageScore assign slightly different weights to each category, as shown in the following table (percentage values are approximate).
FICO Score Factors VantageScore Factors
Payment history, 35% Payment history, 40%
Utilization, 30% Credit utilization, 20%
Length of credit history, 15% Age and type of credit, 21%
Mix of accounts, 10% Balances, 11%
New credit activity, 10% Recent credit, 5%
Available credit, 3%
FICO Score Factors
VantageScore Factors
In addition, within these broader categories listed above, the scoring models have different ways of assigning value to certain variables. Here are a few examples.
Inquiries
Hard inquiries can generally hurt your score by a few points because seeking new credit is considered risky behavior. When people are applying for some types of loans, such as mortgages, auto loans, and student loans, they tend to apply for multiple loans so they can shop for the best rates. Credit scoring models now have different ways of accounting for this behavior so as not to punish consumers for shopping around.
Newer FICO scores group inquiries of the same type together within a 45-day window. That means consumers could apply for 5 auto loans within 45 days and it would only count as one inquiry. Older FICO scores do this within a 14-day window.
FICO scores only apply this rule to student loans, mortgages, and auto loans—not credit cards. According to creditcards.com, the FICO scoring model also includes a 30-day “buffer” against hard inquiries, which means it ignores any inquiries that occurred within the last 30 days.
In contrast, VantageScore groups all inquiries within a 14-day window, regardless of the type of account. You could apply for some credit cards, a student loan, a mortgage, and an auto loan within 14 days, and it would only count as one inquiry.
Collections
Unpaid collections are always going to make a significant dent in one’s credit score, but paid collections and collections with small balances are treated differently between FICO and VantageScore.
With FICO 8, the credit score most widely used by lenders today, all unpaid and paid collections are damaging, regardless of the type of account. FICO 9, the newest FICO score, leaves out paid collection accounts and reduces the impact of unpaid medical collections specifically. Both FICO 8 and FICO 9 disregard collections when the original balance was less than $100.
VantageScore 3.0 and 4.0 are similar to FICO 9 in that they don’t count paid collection accounts and assign less importance to medical collections, but they do not make exceptions for collections with low balances.
Utilization
While utilization is treated fairly similarly with both scoring models, the specific thresholds that affect credit scores vary. VantageScore recommends keeping your credit utilization below 30%, while many experts believe that FICO scores suffer at lower utilization ratios.
Interestingly, the newer VantageScore 4.0 looks at the trends in your utilization over time, such as whether your balances have increased or decreased. FICO scores and previous VantageScore versions only look at the data that is in your credit report at the moment when your score is calculated and do not look “back in time.”
Other Differences Between VantageScore vs. FICO
Tri-bureau vs. single-bureau
With FICO, each credit bureau uses a different version of the score that is specific to that bureau. As a result, consumers often have different credit scores for each credit bureau.
VantageScore, however, was designed to work the same for all three credit bureaus in an effort to reduce the disparity in scores between credit bureaus.
Who can be scored
The two types of scoring models have different requirements for who can be scored.
FICO requires at least six months of credit history and at least one account reported within the last six months. That means if you’re just starting out in building credit, you’ll need to wait six months after opening your first account to establish a FICO score.
On the other hand, VantageScore is able to score consumers with only one month of credit history on at least one account reported within the last 24 months.
Credit score scale
Previous versions of VantageScore had a scale that was different from the scale that the FICO score uses. For example, VantageScore 2.0 ranged from 501-990. The VantageScore 3.0 range was changed to match the FICO credit score scale of 300-850.
However, they have slightly different rating scales within those credit score ranges, as you can see in the table below.
FICO Score VantageScore 3.0
Credit Score Rating Credit Score Rating
300-579 Very Poor 300-499 Very Poor
580-669 Fair 500-600 Poor
670-739 Good 601-660 Fair
740-799 Very Good 661-780 Good
800-850 Exceptional 781-850 Excellent
What Is a Good Vantage Score?
From the table above, we can see that a good VantageScore is between 661 and 780. Compare this to FICO’s good credit score rating, which is a narrower range of scores from 670 to 739.
720 would be considered a good credit score with both FICO and VantageScore. Photo by CafeCredit.com, CC 2.0.
Similarly, an excellent VantageScore credit score ranges from 781 to 850, while FICO’s “exceptional” credit rating ranges from 800 to 850.
Is There a VantageScore to FICO Conversion Formula?
Unfortunately, there is no Vantage to FICO conversion formula that can be used to calculate your FICO score from your VantageScore and vice versa.
As we learned in our comparison of VantageScore vs. FICO scores, the two scoring models assign different values to each credit score category and even have slightly different categories.
They also use different proprietary algorithms, the details of which are carefully guarded trade secrets.
To make things even more complicated, both FICO and VantageScore utilize “scorecards” or “buckets” to categorize consumers. Each scorecard has a different way of scoring consumers. In other words, the specifics of the credit score algorithms vary for different consumers even within the same version of a credit score.
Since each credit score is so complex and we as consumers do not have access to the secret algorithms, there is no reliable or accurate way of converting between the two.
Why Is My Vantage Score Lower Than FICO?
Since VantageScore and FICO scores differ in the weights they assign to each category and variable within the scoring model, it is likely that one will usually be lower than the other.
Since payment history is weighted more heavily with VantageScore than FICO (40% vs. 35%, respectively), a missed payment could bring your VantageScore down a bit more than your FICO score.
Another reason for having a lower VantageScore could be having unpaid low-balance collections on your credit report, which hurt your VantageScore but not your FICO 8 or 9 score.
However, what people tend to see more commonly is that their VantageScore is slightly higher than their FICO score because VantageScore seems to be more forgiving when it comes to credit utilization.
Which Credit Score Is Better?
Unfortunately, there is no straightforward answer to the question of which credit score is superior to the other. Each credit score has value for its respective purposes.
Although some people dismiss VantageScore as being a “fake” or inaccurate version of a FICO score, that’s not necessarily a fair comparison. Although both scores emphasize the same general credit principles, they have significant differences in the ways they treat certain factors. VantageScore is intended to be a competitor to FICO, not an exact replicate, so we shouldn’t expect them to be the same.
Since the same general principles shape how both scores work, however, oftentimes what helps one will help the other. This is why VantageScore has been so successful as an educational score offered by many free sites despite its differences from FICO.
While consumers may often have to pay to get their FICO score, they can monitor their credit and get a good idea of what is affecting their score for free using consumer websites that employ VantageScore. They can then take action that will help improve both their VantageScore and their FICO score.
Therefore, for general credit-building purposes, VantageScore is just as useful as FICO.
That said, it is important to keep in mind that most lenders still use FICO scores and many use earlier versions of FICO, which may be less comparable to VantageScore credit scores. If you are applying for a mortgage soon, for example, you’ll probably want to pull your FICO score in addition to your VantageScore, since mortgage lenders overwhelmingly use FICO in their lending decisions.
VantageScore and FICO scores are both important to get to know as a consumer, especially as VantageScore gradually becomes more popular with lenders.
What do you think about the VantageScore credit score? Have you compared yours to your FICO score? We’d love to hear your thoughts in the comments.
The vast majority of lenders use your FICO 
FICO, the company behind the creation of the original FICO credit score and its many subsequent iterations, has announced the latest model in their line of credit scoring algorithms: the FICO Score 10 and the FICO Score 10 T. The “T” in the latter scoring model stands for “trended,” which reflects the incorporation of trended data over time into the algorithm.
