What Is VantageScore?
VantageScore is a consumer credit scoring model introduced by the major three credit bureaus (Equifax, Experian, and TransUnion) in 2006 as an alternative to the widely-used FICO score, which was created by the Fair Isaac Corporation in 1989. Both VantageScore and FICO scores are prevalent in today’s credit market.
Key Takeaways
- VantageScore assigns consumers a score between 300 and 850 based on their credit history, offering an alternative to FICO scores.
- Developed by Equifax, Experian, and TransUnion, VantageScore is used alongside FICO scores.
- Employing machine learning techniques, VantageScore aims to provide a more accurate and predictive picture of a consumer’s creditworthiness.
How VantageScore Works
The latest version, VantageScore 4, uses six factors to calculate scores, each assigned a unique weighting:
- Payment history (41%)
- Age/mix of credit (20%)
- Credit utilization (20%)
- New credit (11%)
- Credit balance (6%)
- Available credit (2%)
Together, the first three factors make up 81% of your VantageScore.
- Payment history reflects how consistently you pay your credit bills on time.
- Age and mix of credit measure how long you’ve had your accounts and the variety of credit you use, such as credit cards and auto loans.
- Credit utilization analyzes how much of your available credit you’re currently using; lower percentages are better.
VantageScore pools information from all three credit bureaus to create its tri-bureau credit scoring model. It utilizes machine learning and trended data, reflecting changes in credit behaviors over time, to offer a comprehensive view of a consumer’s creditworthiness.
What Is a Good VantageScore?
VantageScores range from 300 to 850. Here’s how they break down:
- Excellent: 750 to 850
- Good: 700 to 749
- Poor: 550 to 649
- Very poor: 300 to 549
Differences Between FICO Scores and VantageScores
Though FICO scores remain the most widely used, VantageScores are gaining traction. FICO scores are based on five factors, whereas VantageScores use six. Here’s a breakdown of FICO score weightings:
- Payment history: 35%
- Amounts owed: 30% (includes credit utilization)
- Length of credit history: 15%
- Credit mix: 10%
- New credit: 10%
FICO scores require a credit history of at least six months or one recent file update, VantageScores can be calculated for individuals with shorter or dormant credit histories. This enables VantageScore to apply scores to approximately 94% of the U.S. adult population.
How Can You Obtain Your Credit Score?
You can obtain your credit score for free from many banks, credit card companies, and websites dedicated to providing credit scores. Often, the scores provided by these sources will be VantageScores.
How Can You Obtain Your Credit Reports?
Legally, you’re entitled to one free copy of your credit report from each of the three major credit bureaus every 12 months. You can access these through AnnualCreditReport.com. Note that credit reports do not include your credit score, which must be obtained separately.
How Can You Improve Your Credit Score?
To enhance your credit score—whether it’s a FICO score or a VantageScore—focus on paying your credit bills on time and keeping your credit utilization ratio below 30%.
The Bottom Line
VantageScore enables scoring for approximately 94% of the adult U.S. population, setting it apart from FICO scores in various ways. Understanding these differences is crucial for managing your credit health and securing future credit or loans.
Related Terms: FICO score, credit utilization, credit report, machine learning, trended data, credit rating agencies, thin files.
References
- VantageScore. “Ushering in a New Standard for Credit Scoring,” Page 2.
- Experian. “What’s Not Included in Your Credit Report?”
- VantageScore. “Ushering in a New Standard for Credit Scoring,” Page 1.
- VantageScore. “Ushering in a New Standard for Credit Scoring,” Pages 1-2.
- Experian. “What Is a VantageScore Credit Score?”
- FICO. “FICO Scores Are Used by 90% of Top Lenders”.
- VantageScore. “Oliver Wyman Analysis Shows 18% Growth in VantageScore Model Market Adoption”.
- myFICO. “What’s in My FICO Scores?”
- myFICO. “FICO Scores Versions”.
- VantageScore. “The VantageScore Model”.
- Consumer Financial Protection Bureau. “How Do I Get and Keep a Good Credit Score?”
