In case you aren’t confused enough by the multitude of different credit reporting companies and credit scores, here is one more to contemplate: the VantageScore. This score was created by a combined effort of the three big credit bureaus—Experian, TransUnion, and Equifax. Although the VantageScore has been around since March of 2006, consumers tend to know less about it than its direct competitor, the FICO score. We’re going to give you a primer on the VantageScore’s origin and function.
Why was the score created?
Since the Fair Isaac Corporation created the FICO score back in the 1970s, it has dominated the world of financial lending. The FICO score is used by banks to assess a consumer’s risk in an estimated 75% of mortgage related decisions. If you are borrowing money, a bank, store, or car dealership is more likely than not to pull up your FICO score. So why would the major credit bureaus care to create the Vantage Score?
Simply put, the credit bureaus see room to make a profit. Each time a bank or lender comes to a credit bureau and asks for a credit score, the bureau must run your information through the FICO model. The credit bureau gets paid by the bank or lender for this task. But they also have to pay Fair Isaac to use its model. The credit bureaus are trying to cut Fair Isaac out of the deal by creating their own score—the VantageScore. The FICO score dominates the market, so if Vantage can compete, it could mean serious money.
How is it calculated?
The three credit bureaus created the VantageScore in conjunction, so they all use the same model to figure your score. However, your score still could differ slightly between the bureaus since they sometimes have different information on their credit reports. While FICO assesses a borrower based on five components, Vantage uses six components. The credit bureaus insist that the factors they choose to weigh make their model more reliable and predictable. Here are the components along with the relative weight they play in calculating the score:
- 32% – Number of recently opened credit accounts and inquiries.
- 23% – Payment history.
- 15% – Percentage of credit amount used or owed on accounts—Vantage calls this utilization.
- 13% – Amount of recently reported balances.
- 10% – Length and types of credit.
- 7% – Amount of available credit.
The credit bureaus also indicate their scoring scale is better and more understandable because it more closely resembles letter grades you received in school. While FICO ranges from 300 to 850, Vantage ranges from 501 to 990:
- 901-990 means “A” credit or Super Prime
- 801-900 means “B” credit or Prime Plus
- 701-800 means “C” credit or Prime
- 601-700 means “D” credit or Non-Prime
- 501-600 means “F” credit or High Risk
Where can I get my Vantage Score?
Now that you know all about the VantageScore, you might be curious where you stand on the scale. Although lenders can request the VantageScore from any of the three big credit companies, it’s not quite as available to consumers. As far as we can tell, only Experian allows consumers to get their VantageScore as a stand-alone product. It might be hidden in a package offered by Equifax or TransUnion, but these credit bureaus certainly don’t market the product.