HouseAmp’s lenders rely on the Experian version of VantageScore 4.0 for their decision-making process. The VantageScore 4.0 model, developed by the three major credit bureaus (Experian, Equifax, and TransUnion), provides a comprehensive evaluation of an individual’s creditworthiness. While it shares a similar score range with the traditional FICO score, spanning from 300 to 850, the factors and methodologies it uses to calculate credit scores are distinct. Understanding these differences is crucial for both consumers and lenders to make informed credit decisions.

VantageScore 4.0 incorporates several factors to determine a consumer’s credit score, with payment history being the most influential at 40%. This reflects whether payments are made on time or late, emphasizing the importance of consistent, timely payments. Depth of credit, making up 21% of the score, examines both the age of credit accounts and the types of credit accounts held by an individual. Credit utilization, which constitutes 20%, measures the ratio of credit used to the total available credit, recommending a ratio above 0% but below 30% for a favorable score. Recent credit behavior, contributing 11%, looks at the number of newly opened accounts and recent hard inquiries, while balances (5%) evaluate the remaining balances on current and delinquent accounts. Finally, available credit (3%) examines the amount of credit available on revolving accounts.

In comparison, the FICO score model, also ranging from 300 to 850, uses a different set of factors and weightings. FICO scores are based on five key components: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%). Payment history remains the most significant factor, reflecting the individual’s track record of on-time and late payments. Amounts owed, which includes total debt and credit utilization rate, is the second most influential factor. The length of credit history considers the duration of time an individual has had credit, while new credit accounts for recent credit inquiries and newly opened accounts. Credit mix evaluates the variety of credit accounts, such as credit cards, loans, and mortgages, indicating the individual’s ability to manage different types of credit.

Although both VantageScore and FICO share the same score range, their categorizations of creditworthiness differ. For instance, a “prime” VantageScore begins at 661, whereas a “good” FICO score starts at 670. This discrepancy can lead to variations in credit scores between the two models for the same individual. VantageScore assigns different weights to various factors compared to FICO. For example, VantageScore gives more weight to payment history (40% compared to FICO’s 35%) and includes additional factors such as available credit and balances. Moreover, VantageScore is more sensitive to recent credit behavior, such as newly opened accounts and recent inquiries. VantageScore’s broader consideration of credit utilization, which includes installment loans, contrasts with FICO’s focus on revolving credit utilization.

Both VantageScore 4.0 and FICO scores are essential tools for evaluating creditworthiness, but they employ different methodologies and factor weightings. Understanding these differences is crucial for making informed credit decisions. Despite the similarities in their score ranges, the unique aspects of each model can result in different credit scores for the same individual. Therefore, considering both scores in the lending process provides a more comprehensive view of a consumer’s creditworthiness.