What is VantageScore?
VantageScore is a consumer credit rating product developed by the top three credit agencies Equifax, TransUnion, and Experian in 2006 as an alternative to the FICO score created by Fair Isaac Corporation in 1989.
- VantageScore is a consumer credit rating product that produces scores between 300 and 850. This is an alternative to the commonly used FICO score generated by Fair Isaac Corporation.
- VantageScore was developed by the same three credit rating agencies (Equifax, TransUnion, and Experian) that FICO uses to create scores.
- VantageScore claims to use “machine learning” technology to generate more accurate images of consumer credit.
Understand Vantage Score
The latest version of Vantage Score 4 is a credit score calculated by averaging five weighting factors.
- Total credit usage, balance, and available credits
- Credit mix and experience
- Payment history
- A new account has been opened
- Credit history age
It employs advanced algorithms and machine learning techniques and claims to be more accurate than the FICO score. “Race, color, religion, nationality, gender, marriage history, age, salary, occupation, employer, employment history, place of residence, [and] Total assets. “
Early versions adopted a score range of 501 to 990, with corresponding letter grades of A to F and different weighting factors. However, VantageScore 3 has switched from 300 to 850, which is the same score range as FICO, and removed the character grades as well as VantageScore 4.
The FICO score remains the most popular credit score and is adopted by about 90% of all lenders. However, according to a survey conducted by consulting firm Oliver Wyman, the use of VantageScore is increasing, increasing by about 20% every year since June 2015. The latest survey of the years from July 1, 2018 to June 30, 2019 found that more than 2,500 users are using approximately 12.3 billion Vantage Scores. Credit card issuers were the most users of Vantage Score, followed by banks.
The higher the Vantage Score, the lower the credit risk.
Vantage Score models and components
Both Vantage Score and FICO Score operate on data stored in consumer credit files maintained by three national credit authorities. The model then performs a statistical analysis on the data to predict the likelihood that consumers will default on the loan. Both the VantageScore model and the FICO model represent the default risk of a loan in the form of a three-digit score, with higher scores indicating lower risk.
People with a Vantage Score of 600 or less are considered to have low or very low credits. The average or fair credit rating is somewhere between 601 and 660. Between 661 and 780 is considered a good credit score, and anything above 780 is considered excellent.
VantageScore components are weighted as follows:
- Total credit usage, balance, and available credits (very influential)
- Credit mix and experience (very influential)
- Payment history (moderate influence)
- New account opened (less influential)
- Credit history age (less influential)
Total credit usage, balance, and available credits look at consumer credit usage. For example, if you have a $ 10,000 credit line per month and you withdraw $ 5,000 from that line, the ratio is 50%.
Credit combinations and experience are related to the type of credit you own, as the combination of revolving credits such as credit cards and installment credits such as mortgages and car loans is considered optimal. Payment history checks to see if you consistently paid your invoice on time. The new account will contain the number of new credit requests. Credit history elapsed time is the length of time you have a credit account.
VantageScore integrates information from all three credit bureaus and is the same for each bureau, but the FICO score uses only the information from one credit bureau and is unique to that bureau.
Differences between FICO scores and Vantage Scores
There are some differences between FICO and Vantage Score. FICO uses only the information from that bureau to create a single bureau-specific score for each of the three credit bureaus. The result is actually three scores instead of one, which can be slightly different as each bureau has different information about the consumer.
VantageScore is a single 3 bureau score used by each of the information from all 3 credit bureaus combined. The FICO score requires at least 6 months of credit history, but VantageScores can calculate for people with less than 6 months of credit history, so it can be rated about 40 million more than the FICO score.
Severe inquiries indicate that an individual may be seeking more credit, which can adversely affect their credit score. At FICO, student loan, car loan and mortgage inquiries have a 45-day period, and VantageScore has a 14-day period for all types of loans. This means that if multiple queries are made in the window, they will be treated as a single query.
For example, if you borrow a personal loan, apply for a credit card, and sign on to your mortgage within 14 days, VantageScore will treat all three credit score inquiries as one. However, FICO only provides exceptions for certain types of loans, so treat these as three queries.