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FICO Score and VantageScore Credit Score Types


A credit score provides an estimate of an individual’s creditworthiness based on an analysis of their credit report. Credit scores evaluate the risk of lending money to consumers. Modern credit scoring dates to 1956 when Bill Fair and Earl Isaac, the founders of Fair Isaac Corporation: FICO, created their first credit scoring system.

FICO Score and VantageScore

In the U.S., two credit score types have dominated the credit scoring industry. FICO Scores has been the industry leader since it was introduced in 1989, while VantageScore, which was created in 2006 as a competitor to FICO scores by the three major credit reporting agencies, Equifax, Experian and TransUnion, has been gaining market share. Both credit scores have similar models and usages, however each uses its own criteria and scoring model.

Similarities

FICO and VantageScore use credit scoring models that analyze a credit report to generate a number: the credit score. The scores attempt to predict the likelihood that, within the next 2 years, a person will be delinquent on a bill. For both credit scores, a higher score indicates less likelihood that a person will miss a payment. FICO Scores are from 300 to 850 (with industry-specific scores from 250 to 900). Since 2013, VantageScores (3.0 and above) use the same 300-to-850 range, even if VantageScores were originally from 501 to 990.

The scoring models are created for use by a wide range of uses, such as credit cards and student loans. In addition, scoring models are updated from time-to-time to adapt to consumer behavioral changes, as well as use new technology and credit-related data.

Creditors choose which score to use and test different models to determine which is best to predict delinquency and manage risk with their customer base. The analysis of credit scores varies depending on the lender, but typically a FICO score of 670 (or a VantageScore of 700) is considered “good”.

FICO and VantageScore models are based  on the information in credit reports when calculating a score.Credit scores are impacted by actions that we take; how much depends on a person’s credit profile and the particular scoring model, but both consider similar levels of significance to actions like paying a bill late.

Differences

If you check your VantageScore and FICO scores, you will find that they are not the same. This is partly due to different scoring models, and also the fact that the criteria are weighted differently in the models.

FICO scores are based on credit data from a single credit bureau: Experian, Equifax, or TransUnion; VantageScore combines information from all three bureaus. FICO requires a credit account with a history of at least six months and activity on any credit account during the last six months. A VantageScore may be created for a credit report with at least one credit account, regardless of the history.

There are a few categories that affect your credit score:

History: are payments made on-time or late, are accounts in collection, how long credit accounts have been open, defaults on loans, and bankruptcy.

Usage: the amount of available credit being used on revolving credit accounts, the amount owed on installment, experience with different types of credit.

Activity: new applications for credit that pull a credit report.

Scoring models weigh the specific pieces of information differently. For example, the utilization of credit is an important scoring factor; most scores consider recent usage of available credit. VantageScore now considers trended utilization which considers whether bills are paid in full or only minimum payments are made.

When a hard inquiry is added to a credit report, it may affect the credit score. Scoring models allow for multiple duplicate inquiries as this may be the customer shopping around. VantageScore allows a 14-day window for inquiries even if they are for different types of credit. FICO Scores now have a 45-day window, but widely used FICO models, such as those used for mortgages, still have a 14-day window. FICO only detects multiple duplicate inquiries for some types of credit. FICO also delays the impact of hard inquiries so that the credit score is not impacted until 30 days later.

Conclusion

While VantageScore and FICO scores have similarities, the underlying scoring models and methodologies have important differences. Of course, both scoring models are trying to predict the same thing: how likely it is that someone will be delinquent on a payment or default on a credit. According to studies, FICO scores are still used in more than 90% of credit decisions in the US, and low FICO scores are a dealbreaker with most lenders.

 

Appendix

Payment history (35%)

Whether an individual pays their credit accounts on time. Credit reports show the payments submitted for each line of credit, and the reports detail bankruptcy or collection items along with any late or missed payments.

Accounts owed (30%)

The amount of money an individual owes. FICO considers the ratio of money owed to the amount of credit available. 

Length of credit history (15%)

The longer an individual has had credit, the better their score. FICO scores take into account how long the oldest account has been open, the age of the newest account, and the overall average.

Credit mix (10%)

The variety of accounts such as retail accounts, credit cards, loans, and mortgages.

New credit (10%)

Recently opened accounts.

How Complex is Integrating and Onboarding Credit Reporting Services?


Are you wondering how to get started with using Credit Reporting Services (CRS)? This helpful guide will equip you with the information you need to learn how to use credit APIs with ease. Starting from the ground up, this guide covers the basics of integrating and onboarding CRS into your products, and introduces you to the key terms and concepts you need to know.

What is an API?

If you’re looking to integrate credit reporting APIs into your website or mobile app, it is essential to become familiar with APIs themselves – what they are, their uses, and how to use them. Anyone using websites or apps comes into contact with APIs all the time, but the term itself is not common knowledge outside of the programming world.

API stands for Application Programming Interface. APIs are tools used by programmers to expedite the process of developing a website or app. If you have ever seen a prompt on a website to “Sign in using Google” or “Sign in using Facebook,” you are looking at an API.

APIs save you and your company the trouble of developing a specific tool for your product from scratch. This is where third-party APIs come in. A third-party API is any API made for a website or app by a third-party developer – i.e. someone other than the website or app’s developer.

Third-party APIs are available for a variety of purposes. You can use one to implement a payment system into your website or app, add a sign-in function, or even give consumers access to credit reports. These consumer viewable credit APIs are an excellent addition to your product, as they allow a consumer the ability to conveniently access credit reports from within your website or app.

Third-party APIs are also useful for companies and businesses. Using APIs that can offer insight into consumer interactions with a product can benefit any company or business. Companies can use credit APIs to access consumer credit reports, as well as for numerous other purposes.

What is a Credit API?

A credit API is a tool within a website or app that gives companies or consumers access to credit reports and other credit reports and scores. Credit APIs are also used by companies and consumers to avoid fraud.

A good credit API gives users the ability to acquire full reports from the big three credit reporting agencies: Experian, Equifax and Transunion. These agencies collect credit information from users independently of each other, so it is essential that a credit API can provide reports from the different agencies.

Some credit APIs are designed to be used by businesses, whereas some are consumer viewable. Credit APIs for businesses will provide resources for fraud detection, identity verification, portfolio management, and more. Consumer viewable credit APIs provide users of your website or app with a means to check their own credit scores with ease.

If you want to include a credit reporting feature in your product, a third-party credit API comes in handy. This saves you time and effort, and leaves you with a reliable premade tool to integrate into your website. The alternative of developing a credit reporting tool yourself or hiring someone to develop one for you, is significantly more difficult.

Why Use a Credit API?

Credit APIs give you and your company access to consumers’ credit reports, allowing you to make fully informed decisions. In addition, using a credit API helps to protect you and your and your company from fraud.

Providing a credit reporting API to consumers as a component of your product is beneficial for multiple reasons. Giving consumers access to their credit reports through your product connects them with your service and gives them an opportunity to interact with your product in a way that benefits them.

In addition, implementing a well-designed credit API into your product conveys to consumers that excellence and reliability matter to you. Including convenient resources such as a consumer accessible credit API builds loyalty to your brand.

A third-party credit API can also be customized to be cohesive with your business’s branding. This makes the addition of the API to your app or website seamless. Ideally, a third-party API will look like an organic extension of the website, not something external.

Using an API to give consumers access to credit reports within your website or app is beneficial because it keeps the consumer connected to your website or app. Linking to an external credit reporting website disconnects you from the consumer and loses the opportunity to offer them a useful service within your brand.

Uses for Credit APIs

Credit APIs are extremely useful tools for numerous types of companies and businesses.

For consumer lending, CRS streamlines the consumer loan qualification process by accessing reliable data from multiple bureaus to help you take the guesswork out of lending so you can make the decisions that matter.

For car loans, CRS is helpful in the process of underwriting. An automotive lender can use CRS to gain a consumer’s credit report data, ensuring that the consumer is reputable and fit for a loan. An automotive lender can also use an API to verify a customer’s identity.

If you are a landlord, credit reporting services can help you make wise decisions with tenants. You can use a credit API to determine who you should allow to live at your properties. Credit reporting services allow you to find all the information you need to screen a potential tenant.There are numerous other fields where credit reporting services are immensely useful, including CRM developmentbankruptcy attorneys, and investor screening. Credit APIs come in different forms, with certain tools performing specific functions. To find out what credit API is right for you, assess your business’s specific needs and functions.

 

How Are Credit Reporting Services Implemented?

Implementing a credit API into your product may seem like a daunting task. Fortunately, the reality is that adding an API to your app or website is not too complicated. This is especially true in the case of the consumer widget, which is already pre-programmed to function, and all you need to do is add the code to your app or website.

When you add a credit API to your website, you are adding the API’s code into your site’s programming. The same goes for loading an API into an app. After you decide to proceed with a credit API, you’ll build out the credit API code into your website, and the credit API will function independently of any additional prompts or setup, as it is essentially a standalone program within your product.

A credit API can serve different purposes within your product. The process of implementing the credit API depends on what its purpose is for your company. If your goal is to gather credit information from consumers that will influence your decisions as a company, you will need to make sure you have all the prerequisites required for accessing consumer credit reports.

Credit APIs: Safe, Compliant and Streamlined

The setup process for using credit APIs involves a contract to ensure that prerequisites for accessing consumer credit reports have been met. This keeps your company’s use of credit APIs compliant, well-documented, and effective.

In addition, it is important to ensure that you have proper measures set up to protect consumers’ credit information. To protect users’ data in the event of a breach, a credit API should have security features in place. One of these features is IP restriction.

IP restriction prevents access to users’ data from any IP address other than the user’s own. If a data breach occurs, having IP restriction in place will protect your consumers’ data from being lost or stolen.

In addition, when using a credit API to access consumers’ credit reports, it is important to avoid storing this data in your system. Instead, you can access consumers’ credit reports using a reference number. This keeps the data out of your system but still accessible.

 In Summary

Implementing a credit API into your product requires some knowledge and work, but it ultimately streamlines the process of getting you, your company and your consumers the resources you need. By making use of credit reporting services, you and your business can develop rapport with consumers, and come to a greater understanding of your customer base.

Now that you are familiar with the basics of what credit reporting services are and how to implement them, you are ready to find the tools that meet your company’s needs. Credit APIs can take your website or app’s functionality to the next level and offer your company the resources necessary to make confident decisions.

Product Update 1: Consumer Credit Score & Monitoring Widget

Add consumer viewable credit score & report functionality to your products within minutes.

Simply set up your account with CRS and embed our iframe code into your website or mobile app, that’s all.

Add Credit Score & Report Functionality within minutes

Custom Branding

Our widget can be customised to represent the look and feel of your brand in order to strengthen the relationship between you and your customers.

Credit Score & Report

The widget includes the Vantage Score with the top four score factors and score history trend as well as a Real-time Credit Report upon enrolment with monthly refreshes.

Daily File Monitoring

You’ll be able to alert customers to key changes on their credit file in the form of One-Bureau credit file monitoring or Tri-Bureau credit file monitoring.

Product Update 2: ZoHo CRM Credit Data Integration

Integrate Credit Data from all three Credit Bureaus directly into your ZoHo CRM.

Easily collect, compare and analyze credit data all inside your ZoHo account.

Integrate real-time credit data & more

3 Credit Bureaus

Access to the three credit bureaus gives you all the information you need to manage the risks associated with extending credit and preventing fraud.

Loan Comparison

Our loan comparison calculator allows you to produce a custom branded loan comparison analysis. Sent your analysis directly to your customers from within ZoHo.

Loan Calculator

Our loan calculator allows you to select existing tradelines from the Credit Report or manually entered loan data for the comparison analysis.