When taking out any type of credit, a credit score is the number one thing to take into account. A credit score will affect your ability to get approved for credit as well as the interest rates and terms applied to your agreement.
What is VantageScore?
A VantageScore is one of several types of credit score models. It looks into your credit history and generates a score based on whether you are likely to keep up with credit payments.
It was jointly developed by the three major credit bureaus, Experian, TransUnion and Equifax. They designed an algorithm to produce VantageScores in 2006 to act as the main competitor to FICO scores.
What is VantageScore used for?
The VantageScore works in the same way as other credit scores. It’s used to show creditors how likely you are to repay borrowed money.
It takes your credit history, payment history and type of existing debt into account to predict future credit behavior.
Lenders are using VantageScore increasingly each year. From between July 1, 2018, to June 30, 2019, there was a 19% increase in the number of VantageScores used.
Most VantageScore users are financial institutions. For example, credit card companies, auto lenders, mortgage lenders and banks. However, VantageScore is also used by non-financial institutions. These include government entities, tenant screenings and even consumer websites.
How is a VantageScore calculated?
A VantageScore generates generic scores using development databases. These work by combining data from all three credit bureaus.
Unlike other credit score models, VantageScore offers a more consistent score, using one model and one set of scoring calculations. This means that you are more likely to see a consistent score across all three credit bureaus.
The VantageScore model has changed a few times since it was first created, with tweaks to the scoring system. Originally, VantageScore used a completely different scale than FICO scores. However, recent revisions to the credit scoring model have altered the scoring scale to match FICO’s.
The VantageScore 3.0 and 4.0 models use a familiar scoring range between 300 and 850. However, earlier versions of VantageScore, versions 1.0 and 2.0, used a scale between 501 to 900 instead.
What factors affect a VantageScore?
A VantageScore takes several factors into account such as:
How does VantageScore differ from FICO scores?
A VantageScore works slightly differently from FICO credit scores, yet they both predict and produce the same thing. Both are widely popular methods of calculating credit scores and are used by many financial institutions.
VantageScore uses a single tri-bureau model which creates a score based on reports from Experian, TransUnion and Equifax.
FICO, on the other hand, creates a bureau-specific score. This means that you could have three slightly different FICO scores from each of the major credit bureaus.
What is a good VantageScore?
According to Experian, a score between 781 and 850 is Excellent score. Scores between 661 to 780 are Good. Scores between 601-660 are Fair and scores between 500 – 600 are Poor. Anything below 500 is Very Poor.
These score ranges are slightly different to FICO scores which only consider scores between 800-850 to be Exceptional.
Experian’s research says that 61% of Americans have a Fair VantageScore or better. 23% of those have an Excellent credit score.
How to find your VantageScore
Federal law requires that each of the credit bureaus allow you to check your credit report for free once a year. So, it’s a good idea to take advantage of this. Simply visit annualcreditreport.com to request your free credit reports.
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