In an episode of South Park titled “T.M.I.” the TMI equation equals the average penis size in America, and with the size so listed, a lot of men are angry and, thus, hilarity ensues, until the Surgeon General rearranges the TMI equation, making lower numbers above average, placating all the angry men and things go back to normal. And what does this have to do with FICO scores? Well, here are the main ones: Equifax (BEACON), TransUnion (FICO Risk, Classic), TU also has the Vantage Score model, which is what Credit Karma uses; and Experian, which is the most used FICO model.
What FICO Model Matters Most?
FICO itself has four different iterations: FICO 98, FICO 04, FICO 8, and FICO 9. No one knows how many different algorithms are being used, but latest sources say 50. But which one of these scores is the most important?
If you’re buying a house, and the loan is backed by Freddie Mac or Fannie Mae, it’s the FICO 04 model. You can get into the details here, but be warned, it’s about as fun as dealing with the IRS.
The FICO 9 model is supposed to factor out the paid collections and medical bills, but like the algorithm in South Park’s T.M.I., episode, it’s still the same data, just compiled in a different way. What’s that saying, “you can put lipstick on a pig, but it’s still a pig”? Same thing with your credit reports, even if you get an updated tradeline alert saying something like your score has improved because a collection is no longer factored, well then the score to get the best rates would just be raised. That’s if lenders adopted the FICO 9 model for mortgages, but they haven’t, so FICO 9 doesn’t have much to do with anything when it comes right down to it. And even if you knew what model your lender did use, the algorithm is still a secret. Different sites use different models, so MyFico will be different from Credit Karma will be different from ScoreSense and Credit Check Total, and usually all of these sites will be far different (usually higher) than the scores pulled by any lending institution.
So What Can you Do?
The best way to handle this gigantic, confusing mess is to put your credit in the best possible position, no matter what model they are using. Trying to customize your report to the different scoring models would be like putting nitrous in your car, but if it’s a boat race, well then that fast car isn’t going to win you the race. Better to be prepared for all contingencies. And that means getting the debts you have current, paying down highly utilized tradelines (credit cards), removing negative data, and possibly adding positive data in the form of seasoned tradelines, and above all, stop applying for credit if you keep getting denied. Getting an approval is not the same as flirting with many different people, it is not a numbers game. A single decline should be a giant STOP sign that lets you know you have work to do on your reports. Many times we will get people calling us asking to buy tradelines because they think they will get a 200 point jump when they have past due accounts, overutilized cards, collections, excessive inquiries, or any combination of those things. If your car needs work, say, a new muffler, then putting brand new spark plugs into it won’t do much until you fix the already existing issue. Tradelines are just like that, amazing tools when used correctly, a waste of money if used incorrectly.
The Bottom Line
Perhaps you’re sitting there thinking, I don’t even need credit, maybe the last time you logged into Credit Karma you even got a boost because of a paid tradeline, where you paid the entire balance of a credit card. And that’s good! But if you’re on this site reading this, or searching out terms like “buying tradelines” then you are probably looking for to improve your credit, and, again, if you don’t have great credit and aren’t looking to get any lending done, that means you have plenty of time, which is good, because some credit repair does take a fair bit of time.
