What is a VantageScore?

If you’ve ever tried checking your credit to see if it was good or bad, you may have heard of VantageScore. VantageScore is a credit scoring model widely used by lenders and credit card issuers that provides credit scores to consumers and helps adults who may not have a credit profile with other models, either because they’re new to credit or don’t use credit frequently. It was developed by the three national credit reporting companies ― Equifax, Experian and TransUnion ― to provide a consistent credit scoring system that can be used by all three of these bureaus and expand the number of people who receive credit scores.

How it works

VantageScore ratings range from 350 to 850. VantageScore4.0 was released in 2017 and contains a few updates over VantageScore3.0, but lenders who use VantageScore often follow VantageScore3.0 calculations. VantageScore follows the same scale as FICO to make it easier for lenders and consumers to understand VantageScores. For VantageScores, here are the credit ranges:

• Bad credit: 300-599
• Poor credit: 600-649
• Fair credit: 650-699
• Good credit: 700-749
• Excellent credit: 750-850

Lenders sometimes categorize borrowers as prime or subprime based on their credit scores, with prime borrowers having credit scores of at least 700, which means lower risk for the lender. Subprime borrowers are less likely to get approved for financing and have to pay higher interest rates for credit cards and loans due to higher risk for the lender.

Benefits of VantageScore

There are a few benefits to VantageScore, with the biggest being how it will calculate a score for those with a low or non-existent credit score. Most credit scoring models require at least six months of credit history and recent credit report updates, while VantageScore only requires one month of credit history.

Another benefit of VantageScore is that it ignores all paid collections, along with any collections, paid or unpaid, under $250. Collection accounts do not look great on your credit report, and they are hard to remove because federal law allows them to be reported for seven and a half years after the original date you first fell behind on a payment. VantageScore is able to circumvent this and help accommodate people with low or already-paid debt.

Additionally, VantageScore provides credit relief for disaster victims by ignoring accounts negatively impacted by natural disasters. Naturally, people often cannot make their credit card payments following a natural disaster, so VantageScore being able to accommodate this is definitely helpful to disaster victims.

As mentioned above, another benefit of VantageScore is how it uses the same scale as FICO, which makes it easier for consumers to understand and manage their credit scores.

What affects my VantageScore?

There are a couple of factors that influence your VantageScore. Your VantageScore is calculated based on credit bureau information to predict your likelihood of making on-time payments each month. These are the key factors that affect your score:

• Payment history (35% of your score)- your record of the bills you’ve paid, whether or not the payments were made on time
• Credit utilization (30% of your score)- how much of your available credit you’re using; try to use less than 30% of your available credit
• Average age of credit accounts (15% of your score)- older credit accounts in your credit history have a positive effect on your credit score and show lenders that you have an established history of responsible financial management
• Account types (10% of your score)- having a variety of account types shows lenders that you can responsibly manage different types of debt
• Inquiries (10% of your score)- lenders often perform hard inquiries into your credit when you apply for credit, and having multiple credit inquiries will lower your credit score because lenders often get suspicious if someone applies for multiple lines of credit at once

As a result, if you want to maximize your VantageScore, you should make sure to make all your payments in full and on time, pay off old debts that may be affecting your score, use less than 30% of your available credit, keep your credit cards open even if you aren’t using them, try to have a variety of accounts and avoid applying for new credit cards you don’t need.

VantageScore vs. FICO

As mentioned earlier, FICO is another credit scoring model that has the same goal of generating a credit score that predicts the likelihood of a person falling at least 90 days behind on a bill within the next 24 months. However, they have a few differences.

One difference between the two systems is that VantageScore can be used with a credit report from Experian, Equifax or TransUnion, while FICO is bureau-specific, meaning each of the major credit reporting agencies use a slightly different FICO model.

Another difference is that you need to have a credit account that is at least six months old and credit activity during the last six months, while for VantageScore, as mentioned earlier, can create a credit score as long as your credit report has at least one account in it even if the account is less than six months old.

Although a higher score on both these models indicates that you are less likely to miss a payment and VantageScore3.0 has the same score ranges as FICO, what qualifies as a good score varies between the two. Here are the credit ranges for FICO:

• Poor credit: 300-579
• Fair credit: 580-669
• Good credit: 670-739
• Very good credit: 740-799
• Exceptional credit: 800-850

Additionally, VantageScore and FICO may take different approaches to how they use or weight specific pieces of information in each category on your credit reports. Although they both place similar levels of importance on the same types of information, the scores may treat things like revolving account balances, collection accounts and hard inquiries differently.

Conclusion

VantageScore is a credit scoring model that is consistent across the three national credit reporting companies and helps adults who may not have a credit profile with other models, such as students and recent immigrants. Credit scores can range from 300 to 850 and are calculated based on your payment history, credit utilization, average age of credit accounts, account types and credit inquiries. To boost your VantageScore, you should try making changes to these factors. FICO is a similar credit scoring model that has different requirements, is less consistent between different credit reporting agencies, has a slightly different interpretation of credit scores and weights specific pieces of information a bit differently. Either way, all scoring models have the same goal of predicting your likelihood of falling behind on payments, so you should focus on building a good credit history to improve all your scores.