Credit scores tell lenders how risky a borrower you are and serve as a key factor in their decisions about whether to lend and at what rate. The higher the number, the better the deal for the consumer.
However, your credit score is not just a universal number. You have several credit scores based on data from three major credit bureaus (Experian, TransUnion and Equifax) and calculated using various scoring models, mainly developed by FICO or VantageScore.
VantageScore was jointly introduced by the credit bureaus in March 2006. Like the FICO score, the VantageScore is inherently a complex formula that collects information about a consumer’s payment behavior and converts it into a single three-digit number.
Here’s everything you need to know about VantageScore, what it means for your credit, and how to check it.
The impact of the different components will vary slightly depending on the model you use (VantageScore 3.0 vs. VantageScore 4.0), but here are the factors that affect your VantageScore:
|Factor||What does it mean||VantageScore 3.0||VantageScore 4.0|
|payment history||History and timeliness of payments||40%||41%|
|Loan depth||Account age||21%||20%|
|Credit use||Used amount of available credit||20%||20%|
|Balances||Amounts owed on accounts||eleven%||6%|
|recent loan||Hard requests and opening new accounts||5%||eleven%|
|Available credit||Amount of available credit on revolving accounts||3%||2%|
How VantageScore is calculated
Unlike older FICO models, VantageScore also takes into account utility and rent payments, as long as they appear on the borrower’s credit history, which may help people with little or no credit history increase their reporting.
The latest model, VantageScore 4.0, also analyzes trend data and takes into account patterns in your credit behavior, rather than just a snapshot of your credit over time. In addition, he places less value on medical bills in collections.
VantageScore Ranges and Levels
These are the credit score ranges for VantageScore:
- Excellent: 781-850
- Good: 661-780
- Fair: 601-660
- Poor: 500-600
- Very bad: 300-499
Who uses VantageScore
“The majority of financial institutions that use VantageScore credit ratings are credit card issuers,” said Rebecca Hunter, CEO of The Loaded Pig. “However, VantageScore credit ratings are commonly used in all categories of consumer finance except mortgages.”
Indeed, according to a 2019 market survey by VantageScore, 60% of financial institutions used VantageScore between 2018 and 2019, including 34% of credit card issuers. VantageScore credit ratings were also used by 7% of personal and installment loan companies, 18% of banks and 25% of consumer websites.
In addition, your VantageScore may be considered when applying to rent an apartment or install utilities.
In most cases, it’s impossible to know what rating your lender or financial institution will use. However, if you are denied a loan, the lender will tell you what assessment he used and what factors influenced the negative result.
How to check your VantageScore
There are many tools you can use to keep track of your VantageScore. Your credit card issuer may even provide your credit score for free. For example, Capital One offers VantageScores based on TransUnion data through CreditWise, as does Chase through its Credit Journey platform.
Many personal finance websites and credit monitoring services offer VantageScore tracking tools, as do budgeting tools like Mint.
Please note that contrary to the persistent myth of creditworthiness, checking one’s own credit score will not lower it, as this is not considered a complex investigation. For this reason, it’s best to check your credit regularly, especially if you’re working on improving your score. In addition, it will help you notice any signs of fraud in time.
“Consumers should regularly check their credit score for errors, and this is often the first red flag for identity theft,” said John Davis, founder of ScoreSense. “Early detection of identity theft is key to combating this crime.”
VantageScore and FICO: what’s the difference?
The FICO scoring model is still by far the most common scoring tool used by US lenders when deciding whether to lend money and at what interest rate. However, VantageScore is gaining popularity, especially among credit card lenders.
VantageScore and FICO scoring formulas differ, especially when it comes to scoring consumers with little or no credit history. VantageScore is different in that it gives new borrowers credit for recent accounts, including those that have been open for less than six months.
“We tally scores as soon as someone starts using credit to attract new immigrants and college graduates,” said Barrett Burns, former president and CEO of VantageScore.
Unlike other credit scores, VantageScore also calculates scores for people who have not used a loan for up to two years. FICO, in contrast, will not generate a score if the consumer has not used a loan for more than six months, and will not calculate a score if the oldest known account is less than six months old.
VantageScore, a credit model developed by Equifax, Experian and TransUnion, may be less used by lenders and credit card issuers than FICO scores, but it has been gaining popularity in recent years. While your lender may or may not consider it, it’s still a good idea to check your VantageScore so you have a clear idea of the state of your credit.