Buying a home can be an exciting part of a persons life. It is among the largest investments one can make in their lifetime and signifies a sense of accomplishment. But it can also be a very scary process, because it can often be a long, drawn-out process. Some of the trepidation people have is whether theyll qualify for a mortgage.
A prospective homeowner may have trouble locating a lender to get a mortgage if they have a short credit history or credit errors in the past. When borrowers don’t have high FICO scores—which are attained through consistent credit use and timely payments—lenders are usually reluctant to take on the risk of approving them. Fortunately for these borrowers, VantageScore, a new creditworthiness algorithm, has emerged to challenge FICO. The following tips can enable homebuyers to identify mortgage lenders that use VantageScore.
Yes, many lenders use VantageScore credit scores! In fact, most of the top 10 US banks, large credit unions, and leading fintech companies utilize VantageScore in one or more areas of their business, including credit cards, auto loans, and personal loans.
Here’s a breakdown of how lenders use VantageScore:
- Credit card issuers: Many major credit card companies, including Capital One, Discover, and Barclays, use VantageScore to assess creditworthiness for new applicants.
- Auto lenders: A growing number of auto lenders, such as Ally, Chase, and Wells Fargo, incorporate VantageScore into their auto loan approval process.
- Personal loan providers: Several personal loan lenders, including LendingClub, SoFi, and Marcus by Goldman Sachs, utilize VantageScore to evaluate borrowers’ creditworthiness.
- Mortgage lenders: While the traditional FICO® Score remains the dominant credit scoring model for mortgages, the use of VantageScore is gaining traction. In fact, the Federal Housing Finance Agency now requires mortgage lenders to use both a FICO® Score and a VantageScore credit score for all loans sold to Fannie Mae and Freddie Mac, which represents approximately 70% of all mortgage loans.
Why are lenders using VantageScore?
Several factors contribute to the increasing adoption of VantageScore by lenders:
- Accuracy: VantageScore has been shown to be as accurate as FICO® Score in predicting credit risk, particularly for younger borrowers and those with limited credit history.
- Accessibility: VantageScore is readily available to lenders, making it a convenient option for credit scoring.
- Inclusiveness: VantageScore considers a broader range of data points than FICO® Score, which can be beneficial for borrowers with thin or non-traditional credit files.
How can you find out if a lender uses VantageScore?
The best way to determine if a specific lender uses VantageScore is to check their website or contact them directly. Many lenders will explicitly state which credit scoring models they utilize. You can also consult resources like Experian’s website, which provides information on lenders that use VantageScore.
Here are some additional resources that you may find helpful:
- Experian: What Is a VantageScore Credit Score?
- Investopedia: How to Find Mortgage Lenders That Use VantageScore
- VantageScore: Lenders Using VantageScore
Remember, even if a lender uses VantageScore, they may also consider other factors when making lending decisions such as your income debt-to-income ratio, and credit history. It’s always a good idea to compare offers from multiple lenders to find the best terms for your needs.
P.S. If you’re looking to improve your credit score, there are several things you can do, such as paying your bills on time, keeping your credit utilization low, and avoiding opening new credit accounts too frequently. You can also check your credit report for errors and dispute any inaccuracies. By taking these steps, you can increase your chances of qualifying for the best possible loan rates and terms.
VantageScore vs. FICO Score
FICO scores are the most widely used scores used by lenders to determine the creditworthiness of consumers. This means that when determining whether to grant a loan, mortgage, or other credit product, more institutions use the FICO scoring model than any other. Most lenders require consumers to meet minimum FICO scores before advancing any credit.
Similar to VantageScore, FICO calculates a score by combining a number of variables derived from a customer’s credit file. These include—from most influential to least:
- Payment history
- Amounts owing on each account
- Credit history length
- New consumer credit files opened
- Mixture of credit
FICO generates scores between 300 and 850. Any score that falls below 580 is considered poor. Scores between 580 and 669 are deemed fair, while those between 670 and 739 are good. Scores from 740 to 799 are very good. Anything over 800 is considered exceptional.
Can I Use a Broker to Find a VantageScore Lender?
For borrowers with poor credit, a mortgage broker is a good choice because they work with numerous lenders, each of which has different requirements for approval. After reviewing a borrower’s application, a competent broker can identify which lender in their portfolio best suits the borrower’s requirements. If a broker has a large lender portfolio, some of the lenders should use VantageScore as their main source of credit data. The borrower could ask the broker to steer their application in the direction of such lenders.
Why we’re using VantageScore
FAQ
Does anyone actually use VantageScore?
Do most lenders use FICO or VantageScore?
Do auto lenders use VantageScore?
How many lenders use VantageScore?
According to VantageScore, more than 2,200 lenders use the model to assess consumers’ creditworthiness. Brokers can also help steer mortgage applications to lenders who exclusively use VantageScore. What Is a VantageScore? VantageScore is a consumer credit rating score created in 2006 as an alternative to the FICO score.
Who uses VantageScores for credit?
Organizations that use VantageScores for credit include: Credit card issuers. Personal and installment loan companies. Auto lenders. Mortgage lenders. Credit unions. Banks. Tenant screening, telecommunications and utility companies. Consumer websites. Government entities.
Why should you use VantageScore?
At VantageScore, we focus on helping lenders make accurate credit assessment and informed lending decisions. As a lender, you hold the key to helping individuals and businesses achieve their financial goals and you want to grow your businesses. That’s why we’ve developed a suite of smart credit solutions tailored to empower lenders like you.
Can you use VantageScore to get a mortgage?
People interested in using VantageScore to get a mortgage should ask lenders which model they use. According to VantageScore, more than 2,200 lenders use the model to assess consumers’ creditworthiness. Brokers can also help steer mortgage applications to lenders who exclusively use VantageScore. What Is a VantageScore?