Credit scores are the somewhat elusive but publicly available numbers that help lenders determine whether they want to offer you a loan. Up until 2006, there wasn’t a lot of competition to the Fair Isaac Corporation’s FICO® score. More recently, you may have noticed another score, the VantageScore. Read on for a full explanation of what this number is and how it differs from other systems.
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What Is a VantageScore?
VantageScore is a credit-scoring model created by the three major reporting bureaus, Experian, Equifax and TransUnion. All scores use data from your credit report, including credit accounts, collections, public records, and credit inquiries. However each score weighs certain factors slightly differently. VantageScore boasts that it is more predictive, consistent and stable than competing credit scores. This is because it user a broader and deeper set of credit report information and more advanced models techniques.
Originally, the VantageScore model used a different scale from FICO®, ranging from 501-990. Newer versions run from 300-850, in line with what lenders and their automated systems are used to. This also makes it easier to interpret, compare and manage your score, no matter what system applicants choose to use.
As with the FICO® score, a higher score is better. In general, a VantageScore about 700 is considered as good and anything above 750 is excellent. If your score falls between 550 and 669, you may be approved for a credit line, but the score won’t get you the best rates. A score between 300 and 549, however, probably won’t qualify you for approval.
How Is a VantageScore Calculated?
Your VantageScore takes into account many of the same factors that your FICO® score will. However, they weight each factor differently. VantageScore weighs your payment history as the most influential part of your credit history. This looks at how well you pay your bills on time.
The next level, highly influential, includes the age and type of credit as well as the percentage of credit limit used. When it comes to age and types of credit, you will want to mix up the kinds of accounts you have with things like mortgages and credit cards. Also good to keep in mind that older accounts hold more weight than newer ones. You should keep your revolving balances low, at around 30%. That way you can show you’re not near to maxing out on your credit limits.
VantageScore considers total balances and debt as moderately influential for your score. As always, it’s best to owe as little money as possible. The less influential factors are your recent credit behavior, credit inquiries and available credit. This looks at how many lenders are inquiring into your credit history. It also checks that you’re not being reckless and sporadic with your credit usage.
Just as with other credit scores, VantageScore does not consider personal information like race, religion, salary and address history in your score.
Changes to VantageScore
The current version of VantageScore is the VantageScore 3.0. It has provided scores to millions of people who were previously “un-scoreable” because they were new to using credit or didn’t use credit frequently. Most other scoring models require at least six months of history and recent credit report updates, but this model only requires a single month of credit history and doesn’t need frequent updates. This provides more consumers with easier access to credit. VantageScore also began ignoring all paid collections under $250 and any accounts negatively impacted by natural disasters.
In fall 2017, VantageScore 4.0 will roll out to provide the most accurate and predictive scores as possible. The model uses new technologies, like machine learning, in addition to trended credit data from the three major credit-reporting companies. This will deliver more accurate credit scores. Not only that, but it can provide even more individuals with credit reports, even those with a short credit history.
VantageScore 4.0 will penalize unpaid medical collections and tax liens less than other types of accounts. The new model will also ignore unpaid medical collections less than six months old. That way, insurance companies have time to make payments.
How VantageScore Differs From FICO®
Neither type of credit score is inherently better than the other. In fact, most lenders modify scores based on their own considerations and calculations. It’s not worth too much effort seeking out your Vantage or FICO® scores to present to a potential lender.
There’s no way to convert credit scores from the VantageScore model to a FICO® score model. The score algorithms are corporate secrets and the differentiating reasons aren’t consistent from person to person.
No matter what your score is, don’t get too caught up with the number. Assess what range your score falls in and consider what habits of yours make the biggest impact on your score. The best ways to improve your credit score are making on payments on time every month, keeping credit balances low and only applying for new credit when you need it.
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