Rental Property Investor Tip FICO VS VANTAGE SCORE

Credit Report & Rental Property Investing

To be a rental property landlord or a property flipper, you 1st need a property!

If you are a real estate investor or are looking to become one, then you would know that there aren’t many things as essential to your property-buying ability as your credit score. That said, a property buyer wants to become a cash buyer, but the irony is that a substantial amount of them start out with having to line up financing for their property and follow-up deals.

This unfortunately implies that they’d have to deal with banks’ scrutiny and begging them for consideration should the numbers not check out solid. Most people just bury their heads in the sand and expect things to turn out fine. Nonetheless, there are some that meet the potential blockade head-on and venture into the credit reporting space.

As a matter of fact, those of us who think we have a grasp of the way things work, though, may not come to the realization that the ‘credit score’ term may not actually mean what we perceive it does.

To me, credit karma is just as likable as it is for the next guy. As a matter of fact, I have the app installed on my smartphone. I check it more religiously than I do with any other thing, not failing to evaluate every week.

On the other hand, were you aware that Credit Karma is not designed to provide you with your actual FICO credit score? Rather, it offers what is recognized as Vantage Score.

How Does A Credit Score Work For / Against the Rental Property Investor?

It works thus; basically, your financial report together with your payment history is sent to credit bureaus, either TransUnion, Equifax, or Experian – three of the most credible ever known. There are others available, but these three are the fundamental organizations your reports can be pulled from.

A separate company known as Fair Isaac Corporation (FICO), which was originally called Fair, Isaac and Company, has an algorithm that reads the information on credit reports and calculates your credit risk. The said risk is then quantified into your credit score.

The number could be between 300 and 850, depending on the type. If you must know, the FICO scores are diverse, all of which are dependent on the entity that pulls the report.

It also depends upon the reason why the score is being collated. But, currently, the popular one is the FICO 8, while some banks are tending towards FICO 9.

What is Vantage Score & How Does it Affect Your Ability to Buy Rental Properties?

The issue with the so called FICO algorithm is that everyone is oblivious of what it is but FICO. Well, some people have come up with some guidelines such as credit utilization accounting for 30 percent of the entire score. But there have been no concrete formulas.

Despite having the right to a free copy of your credit report on a yearly basis, nothing entitles you to your credit score. To obtain your credit score, you can do one of these two things: apply for credit or pay to get your score from a company.

Some credit cards are now in the provision of your FICO score on statements as well. A Vantage Score, nevertheless, is a model of scoring that is always available. You can simply download Credit Karma or look at your Capital One statement to see your Vantage Score.

Why Does It Matter To The Rental Property Investor?

Despite the Vantage Score being argued to compete with the FICO scoring model, quite a few financial institutions actually make use of it. The most important thing is that there can be a wide difference between the Vantage Score and the FICO score.

For instance, I happened to receive an alert from Credit Karma two weeks ago, notifying me that my TransUnion score had dropped by 80 points. Being that I usually pay attention to my credit score quite carefully, I knew something was wrong. When I logged in, I couldn’t find anything wrong being added to my accounts.

Then, I decided to exercise some patience and wait for the day my FICO score would be made available via a website I use. The outcome was that my TransUnion score had gone up with a surprising 9 points.

That means I am currently sitting on a difference of 89 points, implying in turn that the FICO score would soon land funding, while the Vantage Score would make me a laughing stock.

Take-Home For Us Rental Property Investors

Websites within the Credit Karma caliber range absolutely have their place. If you keep a sharp eye on how your financials are being reported, it will make your credit really solid. Nevertheless, in order to get the real dirt, you should download your reports and get your FICO scores from each of the bureaus, as it is essential if you have plans to get mortgaged in the future.

Without the shameless plug provision, currently, there is an organization that is into the provision of FICO mortgage scores, which were at some point in time a sacred commodity of mortgage lenders. People are always curious about how to start investing.

The answer to the common question is: figuring out where your credit score is and how to maximize it is at the top of the list.

Go out there, build some capital, and neatly cultivate your credit.


Joe White

Joe White is a Philadelphia Property Manager and Real Estate Broker. He is the owner of Grow Property Management and has been involved in the management, sales and purchases of Philadelphia area rental investment properties since 2008. He is an author and works as a real estate investment consultant and construction manager.

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