VantageScore is a credit scoring model that first emerged in 2006 as a joint venture of the big three credit bureaus — Experian, Equifax and TransUnion — and now has the distinction of being one of only two scoring models lenders rely on to make lending decisions (the other being FICO). VantageScore currently claims about 10% of this hard-to-crack market for credit scores used in the lending industry, with the greatest adoption seen among the largest banks and lenders.
VantageScore 3.0, introduced in March 2013, is the most recent version of the scoring model. According to VantageScore, this version of their model not only provides scores to general consumers but also helps 30 to 35 million adults who may not have a credit profile with alternative models, whether because they’re new to the world of credit or don’t use credit frequently.
Now that you know what the VantageScore is, you may wonder what impacts this score and how your score measures up (we’ll get to that shortly).
Who Uses This Score: As of June 2016, more than 8 billion VantageScore credit scores were used over the previous 12 months (July 2015 to June 2016). That was a major boost from the previous year — a nearly 40% increase — that set an all-time record for the scoring provider. VantageScore is also used by more than 2,400 lenders, including 34 of the 50 largest financial institutions in the country. Source: www.thescore.vantagescore.com
What Makes Up Your VantageScore
Like other credit scores, your Vantage credit score consists of calculations that rely entirely on credit bureau information — not income, bank accounts or other assets — to predict how likely you are to pay your credit obligations on time each month. Your scores are impacted by your habits of paying on time, keeping debt balances low in relation to your total credit limits, the age of your credit accounts, the variety of accounts you have and the number of inquiries on your credit reports.
It’s important to note, however, that the simplicity and common sense of credit scores are often marred by all-too-frequent credit reporting errors that can lead to credit scoring problems. That can require active management of your credit — much like managing your health.
What Are the Advantages of VantageScore 3.0?
Without a doubt, the most radical feature of VantageScore 3.0 is its ability to calculate a score for 30 to 35 million previously “un-scoreable,” or “thin file,” consumers. While many other scoring models require at least six months of credit history and recent credit report updates, this model only requires one month of credit history and less frequent updates. This makes it possible for those consumers to have easier access to credit.
Other notable improvements include:
- Ignoring all paid collections, as well as any collections, paid or unpaid, under $250
- A new score range of 300 to 850, the same scale used by FICO, making it easier for consumers to interpret and manage their credit scores.
- Credit relief for disaster victims by ignoring accounts negatively impacted by natural disasters.
Score Range: VantageScore 3.0 credit scores now range from 300 to 850, a numerical scale more familiar to lenders and consumers. Source: www.vantagescore.com
VantageScore Credit Education Tools
Of course, for consumers, credit scores are often only as good as the explanations and underlying credit information provided with them. The factors affecting your VantageScore credit score are outlined in the graphic below to help you understand more about what influences your score.
What Really Matters: The most important parts are the key factors that influence your your VantageScore credit score from your credit report. Not all factors have the same impact on your VantageScore credit score (if one of these categories doesn’t apply to you, the other categories would be adjusted accordingly). Source: www.vantagescore.com
Another tool to help boost your understanding is the website ReasonCode.org, which simplifies and translates the codes that appear in your credit report into simple and easy-to-understand concepts.
What Doesn’t Impact My Credit Scores?
There are several things that don’t factor into the VantageScore model — or any other credit scoring model, for that matter — including race, religion, nationality, gender, marital status, age, salary, occupation, employer, employment history, where you live or your total assets.
How to See Your VantageScore
If you don’t know the VantageScore 3.0 version of your credit score, you can find out right now on Credit.com. It won’t cost you anything, and by signing up you’ll also be able to see a free summary of your credit reports. You’ll also be privy to grades and recommendations that can help make managing your credit easy.