Forget About FICO Scores for NMLS-Think Vantage Score Instead

Wirtten my Jim Hogel, staff writer for

Most of us in the mortgage and real estate business are pretty familiar with FICO and its scoring models.  FICO scoring algorithm is used by Experian, Equifax and TransUnion and has been for years. Mortgage FICO scores range from 300-850.

The issue today is NMLS is requiring you to pull your score from Trans Union and it will be a Vantage Score.  (A What?)

So what’s the big deal you might ask? Well for one the scoring model range is from 501-950.  So when you get your score how will you know if a 640 is ok, or a 720? Or will an 820 be the norm?

What You Need To Know About the Vantage Credit Scores

Here is some background information to help us all out. Vantage Score is the creation of a new scoring model developed by Experian, Equifax and TransUnion in 2006. Why would they do this? Simple, they are tired of paying FICO licensing fees to use their algorithm.

In fact FICO sued Vantage Score Solutions and the three credit bureaus (and you thought they were all friends) and FICO lost.  (Now they both have to play in the same sandbox)

FICO still holds about 74% of the credit scoring market, while Vantage Score has captured about 6% since 2006 when it was introduced. After FICO lost they announced they were raising their prices to pull FICO scores through (hey you have to make up for that lost profit right?) So overall Vantage Score has a small piece of the pie.

Here is the Vantage Score claim to fame.  Their model uses a single algorithm at each bureau, which can translate to better score consistency when consumers pull their Vantage Score credit ratings. They claim the Vantage Score model showed an 8 percent increase in credit scores for 10 million consumers after doing a random score check.

Currently, only TransUnion and Experian sell the Vantage Score to consumers for $7.95. Equifax and TransUnion sell FICO scores.

Vantage Score is a new credit score that was developed jointly in March 2006 by the three national credit reporting agencies- Experian, Equifax, and TransUnion. This new credit scoring system has been developed to simplify and standardize scores across the three bureaus. Today, customers find that scores from each of the credit bureaus can vary widely. However, this new credit scoring system tries to reduce these variations, and help the lenders assess their customers in a more consistent way. Consumers can get their Vantage Score through any of the three major bureaus; all of these bureaus use the same scoring algorithm for calculating the Vantage Score.

What is the significance of Vantage Score?

The vantage score ranges from 501 to 990 and at the same time assigns a letter grade ranging from A to F to specify each range. Given below is a set of different score range of Vantage Score and their corresponding grades.

Score Range Grade Comments
901-990 A (Super Prime) Applicants who fall in this range are considered by most creditors, issuers and lenders as the most creditworthy borrowers. Thus a borrower in this category will get best rates and terms on a loan from creditors.
801-900 B (Prime Plus) Borrowers in this category get “good” rates and better terms from creditors. Most of the lenders view the consumers falling into this category as creditworthy.
701-800 C (Prime) Usually lenders offer reasonable rates to the applicants within this score range. However, some lenders may wish to analyze in depth the credit history of consumers in this category in detail and may need additional documentation in order to extend favorable terms.
601-700 D (Non Prime) Consumers in this category will have lot of trouble in getting loans by the creditors. However, a borrower belonging to the non prime range can get credit on less favorable terms from lenders.
501-600 E (High Risk) Many lenders generally prefer to turn down the application form submitted by the applicants belonging to the high risk range. Others may offer credit but will require deposit accounts to protect the loan.

What affects your Vantage Score?

Vantage Score is calculated on the basis of six factors. Each factor plays a vital role in evaluating your Vantage Score; however these factors do not have equal weightage. Given below are the six factors with their approximate percentages:

  • Payment history (32%) – Your payment history basically shows how regularly you’ve paid your debts.
  • Utilization of available credit (23%) – The amount you are using from your available credit.
  • Credit balances (15%) – The total amount of debt that owe to the lenders and creditors.
  • Length of credit history and types of credit (15%) – It includes the duration of your credit history and the types of credit you have.
  • Recently opened credit accounts (10%) – The number of credit inquiries you have made and the currently opened credit accounts.
  • Available credit (7%) – The total amount of credit available with you

So Why Would NMLS Use Vantage Score Instead of FICO – a Score We Are All Used To?

Well take heart the scores may not be as big an issue as we all think. What have we heard from those who have already had their credit pulled? They are looking at the background check (make sure it’s clean) and then for negative items like open collections, judgments, tax liens, bankruptcies on your report.

And here is the bottom line, the states are requesting that you write letters of explanation for any or all of the negative items paid or unpaid.  So be ready to document what happened, why and when. Each state then has the option to terminate, suspend or put you on probation.  We are hearing all kinds of stories from you and on the blogs, so please pass the information about what you are experiencing,  back to us.  Check with your State’s Licensing Board to see what “vantage credit score” they will be using to “grade” you!

NMLS and mandatory credit pulls, it has a purpose and we all understand that. But maybe with current market conditions you could show some grace on how you handle what you are about to see.  If the credit pull has the power to give you a “thumbs up or down” in the profession you love, they should have pulled it before you spent the money on the training and new tests.  I will go out on a limb and guess the loan professionals that have survived this economic housing meltdown, stayed in the business, taken the tests and passed are not fraudulent criminals that were in the business in its heyday.

So get ready, get a copy of your report and preview it (hidden link)

Random Thoughts About Fannies New LQI

I do not have good news for you…Fannie’s Loan Quality Initiative (effective july 1, 2010) is gonna happen…

Brokers, Correspondents, and Everyone else – expect your QC on the post-closing side to tighten-up.  The big news here really is the pre-funding QC –

I have to shake my head as I try to think about how this is going to be done and what it is going to do to the process of closing a loan. It is exactly what it sounds like – a certain percentage of your loans will be re-underwritten by an AUDITOR – Not a production underwriter, but by someone that does QC…

I can only imagine…How will this get done quickly?  Really can’t use the Post-Closing QC staff – they have their own work to do.

Will Lenders add a new department? Called the Pre-funding QC Dept?  Here’s what I see in a nutshell…

1.    two different underwrites
2.    resolution of defects prior to closing – second set of conditions                                      3. Staff ing– who is going to underwrite the loan the second time?
4.  Defect Reports to Management and involved parties every month
5.  Resolution Reports going to Management and involved parties every month

And I thought the threat of re-pulling credit 10 days before a closing was an issue…

As Martha would say…maybe it’s a GOOD THING!

…a way to sniff out those fraudulent loan (or inconsistencies) prior to funding.

…a way for managers to track loan loan officers whose files have a high number of QC issues (pre & post funding).

…maybe it forces managers and comany owners to keep tabs on exactly what kinds of loans are going thru their LO’s pipelines so they dont’ have huge buy-back requests from the agencies.

Expect delays. Rehearse what you’re going to say when you have to relay a 2nd set of closing condition to Realtors(r) & clients.

Could Freddie, FHA and VA be far behind?

Ten Things You Can Do To Protect Your Identity

Facts About Identity Theft:

It’s estimated that there were 10 million victims of identity theft in 2008, and 1 in every 10 U.S. consumers have reported having their identity stolen.

The U.S. Department of Justice reported in 2005 that 1.6 million households experienced fraud not related to credit cards (i.e. their bank accounts or debit cards were compromised).

And, the U.S. DOJ also reported that those households with incomes higher than $70,000 were twice as likely to experience identity theft than those with salaries under $50,000.

What Is Identity Theft?

According to the United States Department of Justice, identity theft and identity fraud “are terms used to refer to all types of crime in which someone wrongfully obtains and uses another person’s personal data in some way that involves fraud or deception, typically for economic gain.”

Such personal information may include your name, address, driver’s license number, Social Security number, date of birth, credit card number or banking information.

Victims of identity theft can spend months trying to restore their good name. And most victims do not realize it has happened until they get denied for a mortgage or a credit card.

Ten Ways to Protect Your Identity:

1.  Dumpster Diving –

Avoid “dumpster diving” by shredding all papers that contain any personal information.

Criminals sift through trash looking for the following:

-Bank Statements
-ATM Receipts
-Canceled Checks
-Credit Card Statements
-Credit Card Purchase Receipts
-Credit Card Solicitations (unopened “pre-approval” solicitations)
-Pay Stubs
-Tax Documents
-Utility Bills
-Expired Identification Cards (Drivers License, Passports…)
-Expired Credit Cards
-Medical Statements
-Insurance Documents

2. Personal Info / Phone Calls -

Never provide personal information, including your Social Security number, passwords or account numbers over the phone or internet if you did not initiate the call.

If you are asked for any type of personal information, before giving any information, ask the caller for their name, telephone number and the organization that they are representing.

You should then call the company using the customer service number the company provides with your account statement. Do NOT call the number you were given by the caller.

To reduce the number of solicitations you receive, you can sign up at the do not call registry:

call: (888) 382-1222

3. Look Over Your Shoulder –

Avoid “Skimming and shoulder surfing” (Never let your credit card out of your sight).

Pay with cash. Try never to let your credit card out of your sight to avoid a fraud scheme known as “skimming”.

According to Wikipedia:

“Skimming is the theft of credit card information used in an otherwise legitimate transaction. It is typically an “inside job” by a dishonest employee of a legitimate merchant. The thief can procure a victim’s credit card number using basic methods such as photocopying receipts or more advanced methods such as using a small electronic device (skimmer) to swipe and store hundreds of victims’ credit card numbers.”

Be aware of people “shoulder surfing”. This is when they are looking over your shoulder or standing too close trying to obtain your PIN number when making purchases with your debit card. They may also be listening for your credit card number.

4. Secure Your Mail –

Always mail your outgoing bill payments and checks from the post office or a neighborhood blue postal box and never from home.

Pick up your incoming mail as soon as it is delivered. The longer it sits the better chance a criminal has of stealing it.

-Get a P.O. Box.
-Lock Your Mail Box

Contact your creditors if a bill doesn’t arrive when expected or includes charges you don’t recognize. It may indicate that it was stolen.

5. Read Credit Card Statements -

Review account statements to make sure you recognize the purchases listed before paying the bill.

If your credit card holder offers electronic account access, take advantage and periodically review the activity that is posted to your account.

The quicker you spot any unauthorized activity, the sooner you can notify the creditor.

6. Monitor Credit Report -

Review your credit report at least once a year to look for suspicious activity. If you do spot something, alert your card company or the creditor immediately.

7. Email Links –

Never click on a link provided in an email if you believe it to be fraudulent.

Keep in mind, no financial institution will ask you to verify your information via email.

Criminals may link you to phony “official-looking” web site to confirm your personal information. This is known as “phishing”.

According to Wikipedia:

“Phishing” is the criminally fraudulent process of attempting to acquire sensitive information such as usernames, passwords and credit card details by masquerading as a trustworthy entity in an electronic communication.

8. Opt Out –

Opt out of credit card solicitations. (Take your name off marketers’ hit lists)

You can opt out of credit card solicitations by calling 1-888-567-8688 to have your name removed from direct marketing lists.

You can do this online at, which is the official consumer credit reporting industry opt-out website for the three credit companies:

Trans Union

9. Safeguard Your Social Security Number -

Protect your Social Security number.

Never carry your Social Security card or anything else with your social security number on it in your wallet or purse, along with your driver’s license.

Do not put your Social Security number or driver’s license number on any checks you may write.

Only give out your Social Security number when absolutely necessary.

10. Read Privacy Policies –

Find out what company privacy policies are (know who you are dealing with).

When being asked for your Social Security number or driver’s license number, find out what the company’s privacy policy is.

Inquire as to why it is being asked for.

Ask who has access to your number.

Ask if you can arrange for them not to share your information with anyone else.


Related Credit / Identity Articles:

The New F Word

Boy do the presidential wannabes love to throw the F word around while slamming the mortgage lending industry and blaming us for all the economic ills of the world. And the F word I’m talking about isn’t what you think. It’s FRAUD. In one presidential debate last night I heard the word FRAUD a dozen times and then I stopped counting because I had to go throw up. To hear these guys (and gals) speak as they have in recent debates you’d think that the entire lending industry made it a mission to take down scores of innocent homeowners and blindside Wall Street. Yes, we are evil incarnate and have devoted our lives to perpetrating FRAUD on the unsuspecting public.

I could dismiss the commentary and mindless blaming if the presidential hopefuls’ proposed solutions didn’t demonstrate an appalling lack of knowledge of the mortgage industry and a complete disregard for free markets.

First, they repeatedly and mistakenly assume that if people can’t or don’t make their mortgage payments that the lenders must have ripped them off, fast-talked them, or committed FRAUD in some way. And that industry profits are proof that lenders are driven by greed and FRAUD. Enough already. Nearly all of the borrowers in default received required disclosures and their loans were originated in accordance with federal and state laws. The instances of FRAUD or predatory lending in the news have been isolated cases involving a handful of bad apples. Every industry has them, and enforcement of existing laws should be sufficient to curtail their activity.

Second, nearly everyone running for the top job in the US proposes freezing rates and dictating what lenders can charge subprime borrowers. Naturally, if lenders can’t charge rates high enough to compensate for serving the subprime market they will just stop lending there–effectively barring subprime borrowers from home ownership. The 85% of subprime borrowers who successfully managed their mortgage would not thank their representatives for this I think.

Finally, there is something seriously wrong with proposed bailout schemes that reward subprime borrowers who skip payments by dropping their rate while punishing responsible borrowers by leaving their rates unchanged.

Which brings up a whole slew of F words: FOOLISH, FRIGHTENING, and FAILURE.