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 serve as 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 data from the three major 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.
The impact of different components will vary slightly depending on which model is used (VantageScore 3.0 vs. VantageScore 4.0), but here are the factors that contribute to your VantageScore:
|Factor||What it means||VantageScore 3.0||VantageScore 4.0|
|Payment history||History and timeliness of payments||40%||41%|
|Depth of credit||Age of accounts||21%||20%|
|Credit utilization||Amount of available credit being used||20%||20%|
|Balances||Amounts owed on accounts||11%||6%|
|Recent credit||Hard inquiries and new accounts opened||5%||11%|
|Available credit||Amount of available credit on revolving accounts||3%||2%|
How VantageScore is calculated
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.
VantageScore ranges and tiers
These are the credit score ranges for VantageScore:
- Excellent: 781-850
- Good: 661-780
- Fair: 601-660
- Poor: 500-600
- Very poor: 300-499
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 VantageScore conducted, 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 it used and the factors that have influenced the negative outcome.
How to check your VantageScore
There are numerous tools you can use to track your VantageScore. Your credit card issuer might even provide your credit score for free. For instance, Capital One offers VantageScores based on data from TransUnion through CreditWise, and so does Chase through its Credit Journey platform.
Note that contrary to a persistent credit myth, checking your own credit score won’t cause it to go down, 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 help you 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 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 those that have been open fewer than six months.
“We score as soon as somebody starts using credit, so that picks up new immigrants and kids coming out of college,” said Barrett Burns, former VantageScore president and CEO.
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.
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 gaining more traction in recent years. While your lender might or might not consider it, it’s still a good idea to check your VantageScore so you have a solid understanding of where your credit stands.