The Wall Street Journal just ran an interesting article titled “This Simple Request Could Lower Your Mortgage Rate” — The link to it is The Simple Request That Could Lower Your Mortgage Rate – WSJ.
FICO and Vantage 4 Scoring models can be compared. And in about a quarter of the time, the difference can be leveraged for your mortgage approval and interest rate. Very good insight to know, as it’s fairly new!
The article points out is that there are several “scoring models” used to come up with a score for you. One shared by all three Credit Reporting Agencies is Vantage Score 4.0. An alternative to that, which is now available as an alternative to determine your interest rate is your FICO score. While the two often track very closely, the author of the article explains that “The two models evaluate credit differently. Classic FICO offers a snapshot at a single moment while VantageScore 4.0 analyzes 24 months of trended balance and payment data. It also factors in alternative data like rent and utility payments and requires less credit history to generate a score.”.
One could assume if you recently dug yourself out of a bit of a credit miss in the past two years, and your 759 score is way better than your 550 score 18 months ago because all the work you have done — such as credit card loan consolidation, debt reduction, credit repair to correct incorrect or wrongful information — then your FICO score may fare better. The better of the two models for YOU can be used.
The article illustrates the savings by example — “On a $400,000 loan, a borrower with a 680 classic FICO score might receive a 6.959% rate on a 30-year fixed mortgage. If that same buyer has a 740 VantageScore 4.0, Sbonek (president and chief executive of Mitten Mortgage Lending) could qualify him or her for a 6.5% rate, saving the home buyer roughly $44,000 in interest over 30 years.” Due to the size and length of a mortgage, relative to a car-loan, the calculated interest is always significant. One may only own the home for a few years, or refinance if mortgage rates drop from close to 7% down to 5%.
It’s an important consideration when working with a funding source or broker. A simple question – “Will you pull the FICO and Vantage 4.0 credit scores, and we can lead with the better one?” could be a deciding factor.
For more details on the top factors lowering your credit scores, see https://www.expresscreditboost.com/blog/top-factors-lowering-scores/,
