What Is the Other Credit Score Besides FICO?
Are you planning to take out a loan or mortgage? Whether you're borrowing $5,000 or $50,000, lenders must check your creditworthiness before giving you the money. Most banks use the FICO score to make credit decisions.
Unfortunately, this credit scoring model doesn’t tell the whole story about your financial history. For this reason, a staggering 26 million American consumers are "credit invisible."
FICO takes into account your payment history, debts, the types of loans you’ve had, and other factors when calculating your credit score. The problem is that it doesn't look at your rent payments, property records, or job history. You can pay everything on time and still have poor credit.
This credit scoring model has its flaws, but it’s not your only option. A growing number of banks, car dealerships, and other businesses are now using alternative credit scoring systems. Others use the VantageScore, a credit scoring model developed by the major credit bureaus.
Interested to learn more? Here's what you should know about VantageScore, its primary competitor.
What Is VantageScore?
Experian, Equifax, and TransUnion developed VantageScore, an alternative to FICO, in 2006. Currently, this credit scoring model is widely used by lenders and landlords.
VantageScore rates your credit usage, payment history, and other aspects in terms of influence. Tax liens or judgments can have an impact on your credit score, too. Based on these factors, consumers are assigned a credit score between 300 and 850.
This credit scoring model uses machine learning and advanced algorithms to evaluate consumers. Although it claims to be more accurate than FICO, it doesn't take into account your assets, occupation, and other critical factors.
Compared to the FICO score, VantageScore puts less emphasis on your credit history. Therefore, it may be a better choice for students and young people.
A VantageScore of 781 to 850 is considered excellent, while one between 661 and 780 is good or very good. Anything below these figures is considered fair, poor, or very poor.
For a free credit score check, you can contact Capital One, Chase, U.S. Bank, or American Express. These lenders provide VantageScore 3.0 credit scores at no charge. VantageScore 4.0., the latest version, is currently being tested by the major credit bureaus.
Is There a Better Option?
FICO and VantageScore are far from perfect. Both credit scoring systems fail to take into account your job situation, salary, and property records. VantageScore is slightly more accurate than FICO, but it's still missing the big picture.
A better option for the unbanked is alternative credit scoring.
This financial approach uses advanced analytics to provide lenders with the data they need to make informed decisions. As a result, it can make it easier for young people and other categories of consumers to access financing.
Lenders who use alternative credit scoring will look at your rent payments, current job, and other aspects. Cell phone payments, for example, could help boost students' credit scores.
Access Your Credit Score Report for Free
As you can see, FICO and VantageScore have major flaws. Both credit scoring systems rely on outdated criteria, making it difficult for minorities and other groups to get the money they need.
For example, more than a third of Millennials have never had a credit card. Their loan applications are likely to be declined because of a lack of credit history. But it doesn't have to be this way.
Sign up on Connect to access your alternative credit score for free! Our team will update your credit report in real-time so you can access financing when you need it.