Credit challenged consumers need to understand the two very different types of credit scores currently being used by both credit grantors and the three largest credit bureaus
At Auto Credit Express for over twenty years we've been helping people with credit problems find the right kinds of new car dealers that can give them their best opportunities for approved auto loans. The vehicles available at these dealerships are both affordable and reliable giving these consumers a chance to repair their car credit and return to conventional auto financing sources as soon as possible.
The first step in this process, however, is having an understanding of what their credit scores are as well as being aware of the information that is contained in their credit reports before applying for auto credit through one of our participating dealers.
But since 2006 there has been an additional credit score that auto loan applicants should be familiar with other than the well-known FICO score.
The second credit scoring system is called VantageScore and it was developed by all three major credit bureaus. Unlike the FICO scoring range of 300 to 850, VantageScore uses a numerical rating of 501 to 990. And while FICO scores come with a loose interpretation of what is good, fair or bad credit (although 720 and above is very good, 640 to 679 is generally good, 580 to 619 is usually not so good and anything between 500 and 580 is bad), VantageScore also assigns a letter grade to the scoring ranges thusly:
• 901-990 equals "A" credit
• 801-900 equals "B" credit
• 701-800 equals "C" credit
• 601-700 equals "D" credit
• 501-600 equals "F" credit
In addition to a different scoring system, VantageScore also uses a different scoring formula. Since Fair Isaac owns their scoring system, as well as the mathematical scoring model itself, VantageScore could not duplicate the FICO scoring system even if its creators knew the formula. In this case,not only is the formula different, but the way VantageScore generally "weights" the various parts of your credit history is also not the same as FICO.
Here are some of those differences:
Vantage Score FICO
Score Payment history 32% 35%
Balances 15% 30%
Credit Utilization 23% 15%
Depth of Credit 13% 10%
Recent credit opened 10% 10%
Available credit 7% 0%
What this means
At this point in time, it's hard to put a finger on what all these differences mean – other than the fact that having more than one type of credit scoring model just makes it that much more confusing for consumers.
As it is, most of us have a hard enough time just trying to monitor our credit information for the three separate credit bureaus. As an example, if there is inaccurate information listed on all three credit reports and you ask to have it removed, two bureaus may remove it while the third, for whatever reason, might not.
Throwing in a second credit score complicates things even further, although generally speaking, lender acceptance and use of VantageScore seems to be lower than that of the FICO score.
It's also not obvious that the new scoring system is more advantageous to consumers – especially those with new or limited credit histories. The fact is, if VantageScore further limits consumers with less than perfect credit from having banks work with them, these people lose out.
The Bottom Line
The jury still seems to be out on whether or not most lenders will eventually use the VantageScore system interchangeably with that of the more mainstream one developed by FICO.
In the mean time, buyers with both good and bad credit should be aware of both.
One more thing that's good to know: Auto Credit Express matches consumers with poor credit with those car dealers that can offer them their best chance for auto loan approvals.
So when you're ready to reestablish your good credit, you can begin the process by filling out our online car loans application.