What Is A VantageScore®?

Finances can be complex, but understanding your credit score doesn't have to be. While most people are familiar with FICO^® – the most widely used credit scoring system in the U.S. – there's another option out there: VantageScore^®.

In this article, we’ll explore what a VantageScore^® is, including how it’s calculated and how to improve it. We’ll also break down how it differs from a FICO^® Score.

Definition Of VantageScore^®

VantageScore^® is a credit scoring model. It assesses how much of a credit risk a borrower is and can influence approval for a loan or credit card.

Since its launch in 2006, it has been widely adopted by several financial institutions, including 90% of the country's largest banks.

What Factors Are Included In Your VantageScore^®?

Like your FICO^® Score, your VantageScore^® evaluates your creditworthiness based on data pulled from your credit report compiled by three major credit bureaus: Equifax^TM, Experian^® and TransUnion^®.

The VantageScore^® 4.0 model considers several factors to evaluate creditworthiness. Here’s a breakdown of these factors, ranked from most to least impactful:

• Payment history (41%): Your track record of bill payment.
• Depth of credit (20%): Your diversity of credit types, such as credit cards, mortgages and car loans.
• Total credit utilization (20%): The amount of credit you use compared to your credit limit.
• Balances (11%): The balance you carry on each credit account.
• Recent credit (6%): A list of newly opened accounts.
• Available credit (2%): The total credit you have available.

VantageScore^® Vs. FICO^® Scores

VantageScore® and FICO® Scores share the same goal: to assess a borrower’s credit health – but they achieve this goal using slightly different methods, leading to nuances in everything from distinct scoring approaches to how they handle multiple credit inquiries.

Credit Score Range

Both VantageScore^® and FICO^® Scores range from 300 – 850. The range gets split into categories, with varying benchmarks for “good” or “poor” credit.

VantageScores^® initially ranged from 501 – 990 but standardized with the release of VantageScore^® 3.0 to be more similar to the FICO^® scale.

Despite some differences, both models prioritize higher scores. Regardless of the model, the higher your credit score, the easier it generally becomes to qualify for credit cards and loans, and you’ll likely receive more competitive terms from lenders.

Credit Score Calculation

Another difference is the number of factors the models weigh when calculating your credit score. FICO^® uses five factors. VantageScore^® uses six. These differences can affect the assessment of your credit.

FICO^® and VantageScore^® assign different weights to the categories on your credit report. FICO^® assigns the following percentages when calculating your score:

• Payment history: 35%
• Amounts owed: 30%
• Length of Credit History: 15%
• New credit: 10%
• Credit mix: 10%

VantageScore^® pulls data from all three credit bureaus to generate your credit score, while FICO^® develops specific credit score models tailored to each bureau's proprietary data.

Credit Inquiries

When it comes to your credit, VantageScore^® and FICO^® look at things a bit differently. One key difference is how they handle multiple loan or credit inquiries within short periods. VantageScore^® counts multiple credit inquiries as a single inquiry if they all happen within 14 days. FICO^® uses a 45-day window.

Credit History

VantageScore^® is more lenient when scoring people with a short or inactive credit history, potentially providing a credit score to millions of additional consumers. To generate a FICO^® Score, you must have at least 6 months of credit history on your credit report.

How To Find Your VantageScore^®

You may know how to find your FICO^® Score, but you should also keep tabs on your VantageScore^®. Here are a few options to find your VantageScore^®:

• Ask your bank: As part of an increasing trend toward transparency, several financial institutions and lenders offer their customers free access to their VantageScore^®.
• Check with a credit monitoring service: Many credit monitoring services offer access to your VantageScore^® as part of their subscription packages. It can be a convenient way to keep track of your score and its health.
• Consult a credit bureau: The three main credit bureaus – Equifax^TM, Experian^® and TransUnion^® – may offer access to your VantageScore^®.

Understanding Your VantageScore^®

Knowing your VantageScore^® is one half of the battle. The other half is understanding your VantageScore^®.

VantageScores^® range from 300 – 850, with different score categories that indicate your creditworthiness.

• Excellent (781 – 850): A credit score in this range signifies exceptional credit health and low risk.
• Good (661-780): A credit score in this range suggests good credit management.
• Fair (601 – 660): A score in this range indicates average credit, but it may be challenging to qualify for favorable interest rates.
• Poor (500 – 600): A score in this range will likely raise red flags to creditors and lenders.
• Very Poor (300 – 499): A score in this range signals significant risk and a high likelihood of default.

Understanding where your credit score falls can help you set goals to maintain or improve your credit.

VantageScore^® Models

VantageScore^® has evolved over time, releasing new versions with improved predictive performance. The current model is VantageScore^® 4.0, often used for online credit monitoring services.

While there aren't huge differences across VantageScore^® models, understanding the changes between versions can help you anticipate potential credit score shifts, giving you the information you need to manage your credit.

It also means that you can technically have two VantageScores^® at one time. There shouldn't be a significant difference between the two, but it may provide insight into which factors impact your score the most.

How To Improve Your VantageScore^®

Improving your VantageScore^® involves consistent, intentional moves. Here are some strategies to consider:

• Pay bills on time: Your payment history is a significant factor with VantageScore^®. On-time payments are crucial.
• Reduce credit card balances: Lowering your credit utilization rate can lead to a substantial credit score boost.
• Use credit responsibly: Successfully managing a mix of credit accounts can positively contribute to your score over time.
• Avoid opening too many credit accounts: New credit and inquiries can temporarily drop your credit score.
• Check your credit report regularly: Identifying and correcting errors on your credit report can help prevent unnecessary score reductions.

The Bottom Line: Knowing Your Credit Score Is Always Important

Whether it’s a VantageScore^® or a FICO^® Score, your credit score is a reflection of your financial health. If you need to improve your VantageScore^® to buy your dream house or get the keys to your first apartment, you can apply different credit-boosting strategies.

Your credit score isn’t set in stone. You have the power to make it even better. Sign up for the Rocket Money℠ app to start improving your credit today.