What is VantageScore and how is it calculated?

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  • VantageScore is a credit scoring model developed by the three major credit bureaus: Experian, Equifax, and TransUnion.
  • VantageScore 4.0 takes into account your monthly credit and credit balances from the last 24 months.
  • FHFA approved VantageScore 4.0 and FICO 10T for use by Fannie Mae and Freddie Mac in October 2022.

When someone talks about Balance levelThey usually refer to their FICO score, which is the oldest and most widely used scoring model. However, VantageScore is gaining, year after year, in FICO.

The second-ranked credit scoring model, VantageScore had a user base of 2,500 lenders 12.3 billion VantageScore Credit scores from July 2018 to June 2019. From March 2021 to February 2022, Fantagescore brag A user base of over 3,000 lenders pulling in 14.5 billion credit scores.

The vast majority of lenders still rely on FICO scores when making lending decisions, but VantageScore is even more important. Here’s everything you need to know about VantageScore and how it works.

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What is VantageScore?

VantageScore is a credit scoring template designed by VantageScore Three major credit reporting agencies: Equifax, TransUnion, and Experian.

Like other credit scoring models, VantageScore is designed to measure a consumer’s creditworthiness. The higher your credit score, the more likely you are to pay off your outstanding debts. This means less risk for lenders, causing them to lower your interest rates.

Comparisons are often made between GPA and credit scores. The first version of VantageScore, released in 2006, assigned consumers a letter score from A to F, which corresponded to a credit score of 501-900. This was the first of four generations to come out of VantageScore.

VantageScore 2.0 was released four years later as a result of The housing bubble burst In the late 2000s and beyond Recession. Volatile financials have given VantageScore a chance to update how they appear in financial files. It came with the same grading system as VantageScore 1.0.

If a lender is using VantageScore now, it is likely using VantageScore 3.0, which was released in 2014. This iteration showed a departure from previous generations in that it dropped the letter-rating system in favor of a five-tier system similar to FICO. It has also adjusted its score range to 300-850, just like FICO.

The ranges are divided as follows:

The credit bureaus released VantageScore 4.0 in 2017, though the credit world has not widely embraced this generation. More on VantageScore 4.0 later.

VantageScore vs. FICO

Because VantageScore was created as a competitor to FICOThey work similarly. Both recording models operate at a scale of 300-850, although, as we discussed earlier, this wasn’t always the case.

“Think Pepsi and Coke,” says John Olsheimer, a credit expert and former employee of FICO and Equifax. “Simply.”

However, your VantageScore will likely differ from your FICO score. This is because VantageScore weighs your credit score information differently. Here is the full detail:

While FICO and VantageScore weigh payment history equally, it’s worth noting that FICO weighs new balance — which takes into account recent hard inquiries — twice as much as VantageScore.

Regardless of the accounts, it’s worth noting that FICO is still, by far, the dominant credit scoring model. FICO claims 90% of lenders use FICO scores when deciding whether to lend money to a borrower. Ulzheimer says that just because FICO leads VantageScore in usage, that doesn’t mean VantageScore is irrelevant.

“Being second in credit score is still a really good place to be, given the huge amount of credit scores that are used each year,” says Ulzheimer.

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VantageScore 4.0.0 Update

VantageScore 4.0 is the latest generation of credit scoring form. Unlike previous models, version 4.0 takes into account “common data”. Common credit data looks at the balances on revolving lines of credit (credit card balances) over the past 24 months to predict future performance. “This data is highly predictive of risk,” says Olsheimer.

With an additional metric to track, VantageScore 4.0’s new account distribution changes quite a bit. Here is the full spread:

In October 2022, the Federal Housing Finance Administration (FHFA) VantageScore 4.0 and FICO 10T certified For use by Freddie Mac and Fannie Mae. This means that when these credit scoring models are implemented in a few years, lenders will be required to provide FICO 10T and VantageScore 4.0 to companies.

How to check VantageScore

Most financial institutions, such as credit card companies or banks, will provide you with your FICO score. However, since VantageScore isn’t nearly as popular or widely used, you may not be able to access your score right away.

However, there are still plenty of ways to access VantageScore for free The
VantageScore site listings. For example, Credit Karma VantageScore offers your 3.0 from TransUnion and Equifax. Many places like American Express, CreditWise, and Credit Sesame also offer VantageScores.

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