Personal Finance

FICO vs. VantageScore: Do You Know What Credit Score You’re Monitoring?

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As an investor—or future investor—few things are quite as important as your credit score. Granted, everyone wants to be a cash buyer, but most start out having to line up financing for their first deals. Unfortunately, this means facing the bank’s scrutiny and being at their mercy if your numbers are not solid. A lot of people just shove their heads in the sand and hope for the best. Nevertheless, some meet the potential obstacle head-on and delve into the world of credit reporting. Even those of us who think we have an idea of how things work, though, may not realize the term “credit score” may not mean what we think it means.

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I like Credit Karma as much as the next guy. In fact, the app is downloaded on my phone. I check it religiously every seven days. However, did you know Credit Karma does not provide your actual FICO credit score? Instead, it provides what is known as a VantageScore.

How Your Credit Score Works

Basically, your financial and payment history is forwarded to credit bureaus. There are three well-known bureaus: TransUnion, Equifax, and Experian. There are others, but these are the primary consumer bureaus you can pull your reports from. A separate company, FICO (Fair Isaac Corporation, originally Fair, Isaac and Company), has an algorithm that reads the information on your credit reports and calculates your credit risk. This “risk” is quantified into your credit score. Depending on the type, this number may be between 300 and 850. There are actually multiple “FICO” scores, depending on the entity pulling the report and the purpose of the score being pulled, but currently the most common is the FICO 8. Some banks are moving toward FICO 9.

credit-report-loan

Related: 4 Ways to Manage Bad Credit: A Guide For Real Estate Investors

What is the VantageScore?

The problem with the FICO algorithm is no one knows what it is but FICO. Some guidelines have been provided, such as credit utilization accounting for 30% of your score, but no concrete formulas. Although you are entitled to a free copy of your credit report annually, you are not entitled to your credit score. To get your credit score, you either have to apply for credit or pay to get your score from a company. Some credit cards now provide your FICO score on statements as well (cough, Discover). A VantageScore, however, is a scoring model that emerged as a joint venture between the credit bureaus in 2006 that is more readily available. By downloading Credit Karma or looking at your Capital One statement, you can see your VantageScore.

Why Does It Matter?

Although the VantageScore is argued to compete with the FICO scoring model, very few financial institutions actually utilize it. More importantly, it can be VASTLY different from your FICO score! For example, about two weeks ago, I received an alert from Credit Karma that my TransUnion score dropped 80 points! I watch my credit score very carefully, so I knew something was not right. I logged in, and absolutely nothing negative had been added to my accounts. I patiently waited for the date my FICO score would become available through a website I use. The outcome? My TransUnion score went up nine points! Currently sitting at an 89 point difference, the FICO score would land funding, while the VantageScore would get me laughed at.

Related: Why Credit Scores Matter & How to Improve Them

Moral of the Story

Websites like Credit Karma absolutely have their place. It really works great to keep an eye on how your financial accounts are being reported. However, to get the real dirt, you need to download your reports and get your FICO scores from each bureau. This is especially important if you plan to get a mortgage at any time in the future. Without providing a shameless plug, there is currently a company that even provides FICO mortgage scores, which were once a sacred commodity of mortgage lenders. People often ask how to get started as an investor. Figuring out where your credit score is and how to maximize it is at the top of that list.

Network, build capital, and cultivate your credit!

How do you monitor your credit?

Comment below!

As a freelance writer, Leather Nix has written professionally since 2005. Her portfolio includes legal, business, and financial topics, as well as general content for the web and print. Having stud...
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    Ada Ayala Investor from Las Vegas , NV
    Replied about 2 years ago
    Hello I just wanted to know what website or company you use to monitor your FICO Score.
    Isaac Agbolosoo Rental Property Investor from Grosse ile, MI
    Replied about 2 years ago
    Credit karma and creditsesame are free services you can use.You will be able to check your scores and reports and setup monitoring.
    Leather Nix from Longview, Texas
    Replied about 2 years ago
    Hey Ada, Credit Check Total and MyFico are both sites that provide your FICO score. Credit Check Total also has an intro 7 to 10 day trial for $1. If you want to cancel though, you’ll want to email them instead of calling, or you’ll be on the phone forever!
    Miles Webb from Asheville, NC
    Replied about 2 years ago
    Hi! On Credit Check Total and MyFico, which credit bureau scores do they give, all 3 bureaus?
    Miles Webb from Asheville, NC
    Replied about 2 years ago
    Nevermind, I see Credit Total does all 3 for the $1 intro price. Thanks!
    Randall McNair from Alameda, California
    Replied about 2 years ago
    Hi Ada, I have two Barclaycards accounts and both offer free FICO monitoring. As a Vegas resident, you may want to check out the Barclaycards Raiders Visa. https://cards.barclaycardus.com/cards/nfl-extra-points-credit-card.html Good luck to you!
    Leather Nix from Longview, Texas
    Replied about 2 years ago
    Thank you Randall for sharing. Discover also gives you the FICO 8 Transunion score.
    Chris Moates Rental Property Investor from Birmingham, AL
    Replied about 2 years ago
    You might as well ignore Advantage. It means nothing. Fico is the only thing that matters. Having said that I monitor my credit and have it locked with Experian.com. I think it’s like $29 bucks a month. You get Fico scores from all agencies once a month, app access to turn your credit profile on/off and real time notification if fraud is detected. Also, if you wanna clean up any discrepancies with any of your reports I HIGHLY recommend Lexington Law and I wouldn’t use anyone else. I’ve used them for friends and relatives to help out and educate. Everyone I signed up has 750+ scores or better today and it didn’t take long. They have a great dashboard and management system. Touch it once every 30 days and let Lexington do what they’re good at. Been a professional in the business a long time – trust me, these guys are really good and have exceptional phone access and customer service. If you have any experience in lending or real estate, you’ll slide through their process with a breeze and probably see amazing results in 6 months or less.
    Ezichi Oha Wholesaler from North Hollywood, California
    Replied about 2 years ago
    I realized my credit karma and actual fico score are different when i went to buy a car. My FICO score was lower than my credit karma score.
    Charles Branch from Pontiac, MI
    Replied about 2 years ago
    That happened to me too!
    Leather Nix from Longview, Texas
    Replied about 2 years ago
    It’s happened to a lot of people!
    Eric A. Rental Property Investor from St. Augustine, FL
    Replied about 2 years ago
    Wealthy people could care less about their credit score and if you are borrowing money why not find a private lender? I cringe when I see an article that relates credit scores, institutional banks, and real estate investing.
    Chris Moates Rental Property Investor from Birmingham, AL
    Replied about 2 years ago
    Conventional lending has it’s place. If you don’t have the scores, you remove an opportunity. Private money is not always there. If you need the added security of conventional lending, you have to play the game and that game is FICO. Personally, I wouldn’t partner with anyone that doesn’t manage their scores. It’s just prudent and a very good reflection of personal wealth management. Not to be argumentative, however I completely disagree with your comment “wealthy people could care less….”
    Leather Nix from Longview, Texas
    Replied about 2 years ago
    I’m sure everyone would appreciate your list of private lenders!
    DeNay Ramsey Rental Property Investor from Concord, CA
    Replied about 2 years ago
    Hello Heather, This is a very interesting article you’ve written. I stay on top of my credit report and will use Credit Karma only as a guide and tool to manage my credit. I recently noticed that the score on Credit Karma was 104 points lower than my actual FICO score when I applied for a personal loan. I was approved by the lender with the lowest interest rate they offer because my credit score was considered excellent by the bank. However to the contrary, Credit Karma had rated my score as fair and substantially lower the lender pulled FICO score.The criteria that VantageScore uses is a tremendous difference than what the FICO criteria is using.
    Leather Nix from Longview, Texas
    Replied about 2 years ago
    Thank you Denay. That has happened to a lot of people!
    Charles Branch from Pontiac, MI
    Replied about 2 years ago
    Hello Leather, Thank you for writing the article. It confirmed a suspicion that i had when i recently went to get pre-approval for a home: Credit karma scores do not match FICO! Recently my Bank Of America credit card also provided my Fico score. One question i had though, with relationship to the information, is Credit Karma (or other websites providing vantage scores) accurate? I understand the score is different but actual content is the same as FICO , right?
    Nicholas Layton
    Replied about 2 years ago
    FICO doesn’t provide content in your credit report. The credit bureaus do that. FICO just calculates a number based on what the bureaus are reporting.
    Leather Nix from Longview, Texas
    Replied about 2 years ago
    Yes, the actual content is accurate and up to date. They just calculate the score differently. I still use Credit Karma to watch my accounts, even though I pay for a credit monitoring service. It’s kind of overkill, but I didn’t delete it after I subscribed to good FICO provider.