VantageScore, a credit score model designed by the three credit bureaus, offers another way for consumers to educate themselves about credit. Here’s what you need to know.
Credit scores tell lenders how risky a borrower you are and are a key factor in their decisions on whether to lend, and at what rate. The higher the number, the better the deal is for a consumer.
Your credit score, however, isn’t just one universal number. You have multiple credit scores based on the data from the three credit bureaus (Experian, TransUnion and Equifax) and calculated using different scoring models – mostly designed by FICO or VantageScore.
VantageScore was jointly introduced by the credit bureaus in March 2006. Like the FICO score, VantageScore is at its core a complicated formula that takes information about a consumer’s payment behavior and crunches 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.
VantageScore vs. FICO: What’s the difference?
FICO’s scoring model is still unquestionably the most common scoring tool used by U.S. lenders when deciding whether to loan money and at what interest rate. Yet, VantageScore has been gaining popularity, particularly among credit card lenders.
VantageScore and FICO’s scoring formulas vary, especially when it comes to scoring consumers with little or no credit history. VantageScore sets itself apart by giving new borrowers credit for recent accounts, including accounts that have been opened less than six months ago.
“We score as soon as somebody starts using credit, so that picks up new immigrants and kids coming out of college,” says VantageScore President and CEO Barrett Burns.
Unlike other credit scores, VantageScore also calculates scores for people who haven’t used credit for up to two years. FICO, by contrast, won’t generate a score if a consumer hasn’t used credit in more than six months, nor will it compute a score if the oldest known account is less than six months old.
Who uses VantageScore
“The majority of financial institutions that use VantageScore credit scores are credit card issuers,” said Rebecca Hunter, CEO of The Loaded Pig. “However, VantageScore credit scores are commonly used across every consumer finance category except mortgage loans.”
Indeed, according to a 2019 market study conducted by VantageScore, 60% of financial institutions used VantageScore between 2018 and 2019, including 34% of credit card issuers. VantageScore credit scores were also used by 7% of personal and installment loan companies, 18% of banks and 25% of consumer websites.
On top of that, your VantageScore may be considered when you apply to rent an apartment or set up utilities.
Most of the time, there’s no way to find out which score your lender or financial institution will use. However, if you’re denied credit, the lender will disclose which score was used and the factors that have influenced the negative outcome.
What is a good VantageScore?
The model of VantageScore mainly used by lenders, VantageScore 3.0, as well as the latest model VantageScore 4.0, use the same the 300 to 850 range FICO does, making it easier to compare your credit scores.
A VantageScore credit rating from 750 to 850 is considered excellent, and scores between 700 to 749 are considered good. Scores between 650 and 699 are fair, while scores in the 550 to 649 range are viewed as poor, and 300 to 549 as very poor.
VantageScore ranges and tiers
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How VantageScore is calculated
VantageScore 3.0 primarily considers overall payment history – which is the most influential factor when generating a score – as well as the age of each account, type of credit used and the percentage of a borrower’s total credit limit that’s been used. The amount of debt owed by borrowers is also considered to be “moderately influential” while available credit and recent credit behaviors are considered to be “less influential.”
Unlike FICO’s older models, VantageScore also considers utility and rental payments, provided they appear on the borrower’s credit history – possibly helping people with little to no credit bulk up their reports.
The latest model – VantageScore 4.0 – also looks at trended data and considers your borrowing behavior patterns rather than just a snapshot of your credit in time. Additionally, it places less value on medical accounts in collection.
How to check your VantageScore
There are countless tools you can use to track your VantageScore. Even your credit card issuer might provide this service. For instance, Capital One offers VantageScores based on data from TransUnion through CreditWise, and so does Chase through the Credit Journey platform.
See related: Credit cards that offer free credit scores
Many websites offer VantageScore tracking tools as well. Websites like Credit Karma and Credit Sesame advertise it as one of their main features. You can also stay on top of your VantageScore while keeping track of your budget with budgeting tools like Mint.
See related: Best credit monitoring services
Note that contrary to a persistent credit myth, checking your own credit score won’t cause it to lose any points, since this isn’t considered a hard inquiry. For that reason, it’s best to check on your credit regularly, especially if you’re working on improving your score. Additionally, this will allow you to notice any signs of fraud early.
“Consumers should check the credit score regularly in case of errors, and also it is often the first red flag for identity theft,” said John Davis, founder of ScoreSense. “Catching identity theft early is key to combating this crime.”
VantageScore, a credit model designed by Equifax, Experian and TransUnion, might be used less by lenders and credit card issuers than FICO scores, but it’s been getting continuous traction in recent years. While your lender might or might not consider it, it’s still a good idea to check your VantageScore to have an understanding of where your credit stands.