FICO 5 VS FICO 8
FICO Score range from 300-850 and a score of 700 or above is preferred by most lenders. Credit scores are one of the main things that lenders look at in deciding whether you get approved or denied. What most people do not know is that there are many diverse types of credit scores, however most lenders use FICO. Even FICO uses different variations to determine if you can be a reliable prospect for credit approval. Today I want to explain the difference between FICO 5 and FICO 8.
The biggest difference is that FICO 5 is the most commonly used by mortgage lending companies and FICO 8 by credit card companies. FICO 5 has been around for a much longer time, and this is what most mortgage and auto lender industries are more accustomed to. FICO 5 is a fluctuation of different components.
- 35% is Payment History
- 30% Amounts Owed
- 15 % Length of Credit History
- 10 % New Credit
- 10% Types of Credit Mix
Fico 5 also considers other information such as residential history, medical accounts, and employment history. Since auto loans and mortgages are such a high dollar amount, most banks rely on FICO 5 to decide if an application is approved or denied. If you have a charge off or an unpaid collection it will be very difficult to get a loan officer to approve your application.
Fico 8 is a new scoring system that was introduced back in 2009. Most Credit Card companies will use the FICO 8. All versions of credit calculation s are meant to help lenders convey their commitment to managing personal debt. When you as a consumer pay your bills on time, keep credit cards under 10% balance and only open new accounts when you really need to on specific purchases you will generate excellent score. If you have a collection debt under $100.01 on your credit history, FICO 8 will not consider it harmful towards your credit card application. However, any type of late payment is highly sensitive for a lender using FICO 8. Please remember your payment history has the most impact, making up 35% of your total score. Bottom line all lenders want to receive their payments on time and will gladly lend to those with excellent credit responsibility.
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*Individual results may vary. Please call for more details and to discuss your own individual situation.