Today, millennials will do anything they can to save a little extra cash—especially when it comes to credit score evaluations. As a result, credit score services have overwhelmed potential homebuyers with advertisements for free credit score assessments. While some of these services may be helpful, it’s important to remember that many do not provide the most widely accepted FICO Scores. Let’s take a closer look using VantageScore as an example. 

According to various industry “experts”, “it doesn’t matter whether a consumer receives a FICO Score or VantageScore, because they all work similarly: if you rank high on one score, you’ll rank high on another score and all these scores move up and down together.” This, however, is simply not true.

You see there are nine commonly used versions of the FICO Score. These versions account for specific products, like auto loans, and older generations of FICO Scores still regularly used by mortgage lenders. Each version is calculated differently, and thus produces a different score. For example, FICO Score 9 is used to calculate medical collections, and does so much differently than previous versions. If someone has only one negative item, a paid medical collection, then the person could have a FICO Score 9 that is 100+ points higher than a previous FICO Score version.

When comparing the various FICO Score versions, studies even show that most consumers have a significant difference between their highest and lowest scores, similar to the FICO Score 9 example. In fact, the average difference hovers around 62 points, while nearly 10% of the population has a difference of over 100 points. This means that a borrower would likely get a different rate or credit approval decision depending on which FICO Score (the highest or lowest) is applied.

With nine FICO Score versions commonly used, it’s therefore immensely difficult to determine whether you’ll score a high FICO Score if you have a high VantageScore—especially because FICO Scores require much more information to complete a calculation. In fact, FICO only generates scores using credit bureau files that have sufficient and recent enough data to create an accurate score. VantageScore, on the other hand, can apply any file towards the credit score. These scores do NOT reflect the consumer’s accurate credit-worthiness, and this has become a significant issue for potential homebuyers throughout the country. More specifically, nearly 65% of mortgage loan applicants present a credit score provided by websites similar to VantageScore.

To ensure that you have the correct information on your loan application, it’s best to talk to your local lender. This will guarantee that you understand which FICO Scores the lender will use when you apply for credit.

For more information about FICO Scores, or to learn more about home financing, contact one of our mortgage specialists today.