The Vantage Score

The Vantage Credit Score (“VantageScore”) is a credit scoring method that appeared in 2006. It is used by some major lenders for consumer credit transactions. Vantage is slowly becoming a household name alongside its more established rival, the FICO score.

The Vantage score is available through the three major credit bureaus (Equifax, Experian and TransUnion). They are known as “The Big 3.”

These credit reporting agencies want Vantage to overtake FICO in consumer credit markets.

The challenge for them is to convince individual lenders, creditors and others who rely on this data to embrace their brand. Despite efforts by the “Big 3” to make it a success, Vantage Score falls behind FICO in popularity.

When people discuss their credit scores it’s unlikely they are talking about their Vantage score. This is mainly because FICO has been around since 1956, decades longer than the VantageScore credit model. Vantage has traction in different markets so that long history could become less important and the Vantage Score may someday eclipse FICO in popularity.

You can see your VantageScore 3.0 at no cost and it includes your credit report. Free Vantage score and report? We want to help you save time and money so it’s a great way to start managing your credit.

The Origin of Vantage Credit Scoring

Since the 1970’s the major credit score used to qualify borrowers for most credit purchases has been the FICO score. The Big 3 have pushed to develop a score that can compete with FICO, a company that specializes in credit analytics.

The logic behind this is simple. The credit reporting agencies are dependent on FICO’s scoring method because it’s used by most companies that make consumer credit decisions. By having their own score, the bureaus could have more control over licensing and usage in credit markets. The result was Vantage, formulated in 2005 and introduced to the public in 2006.

The official Vantage Score website offers reasons for why the score was introduced. Among them are:

• Standardized scoring system between the bureaus
• More “granular” results that take into account several factors in predicting credit
• Precise results that make up to 35 million more consumers eligible for credit offers

The original rollout of Vantage credit scoring was met with lukewarm response. Then VantageScore 2.0 was introduced in October 2010. The company insisted this was an improvement on the original Vantage scoring model. It allowed more credit risk for subprime lending.

Still, most home loan companies and lenders in markets such as auto loans and durable consumer goods continue to rely on FICO scores for approving credit transactions.

The newest iteration of Vantage was released to the public in 2013. It is labeled VantageScore 3.0 and features a modified numerical scale for assessing creditworthiness. Prior to this, the VantageScore’s scale ranged from 501 to 990.

The 3.0 version has a range of 300 – 850. VantageScore representatives say this is closer to the well-known FICO scale. They admit that this familiarity will help its potential customer base accept it as a replacement for FICO.

How Vantage Scores Are Calculated… *

The algorithm used to calculate VantageScore is not made known to the public. However, the company has published information about general VantageScore credit categories and scoring factors that relate to consumer behavior:

• Payment history, on-time payments: 28%
• Credit utilization, debt-to-credit ratios: 23%
• Credit balances what your total debt is: 9%
• Length of credit history and types of credit: 9%
• Recent credit, number of credit inquiries and new accounts: 30%
• Available credit – this relates to consumer debt-to-credit ratios: 1%

* From: Experian article on VantageScore

The early form of Vantage credit scores were confusing for consumers and Loan Officers. Most people were familiar with FICO scores. Translating one score to it’s equivalent credit risk in the other one was inefficient. There wasn’t much to guide a borrower trying to translate between the two credit scoring systems.

For example, compare a 667 FICO score to the same borrower showing a 742 VantageScore. Do the two scores indicate the same creditworthiness? Do they place the same importance on the factors used to calculate each score? And with such uncertainty, how can consumers be confident they are taking the correct steps to improve their credit scores?

Vantage overcame some of the confusion by including a simple grading system that most people are accustomed to. Vantage assigns a letter grade to its scores, such as A, B, C, D, and F. This makes the score simpler and easier to understand.

VantageScore 3.0 vs FICO

The Vantage Score emphasizes recent credit. This is considered to be consumer behavior within the previous 24 months. When you check your credit score, you’ll notice that FICO adjusts for recency of credit too. It doesn’t seem to be as sensitive to it as Vantage is. And that’s one of the points of VantageScore 3.0: To derive predictable credit decisions that account for the exceptional events that destroyed the finances of otherwise responsible consumers throughout the recent recession.

Unlike FICO, VantageScore 3.0 facilitates having utility bills and rental payments factored into its credit system. Although most landlords don’t report rental payments of their tenants, this helps confirm the direction VantageScore is trying to go. It is basically attempting to drill down into more recent payment activities of people who would otherwise slip through the cracks of the FICO system.

A goal behind new credit score methods is to make credit available to the 35 million consumers who would be disqualified through the FICO system. Vantage credit score’s “fine grained” approach to consumer behavior provides a more accurate predictor of credit risk.

That said, Vantage has a long way to go to overtake FICO, which is rock solid in most credit markets. VantageScore has changed thinking about conventional credit scoring models. Compared with other companies aspiring to overtake FICO, VantageScore is at the front of the pack and gaining every year.

You can see your VantageScore 3.0 credit score and credit report free with an easy online application.