Your credit score tells lenders how likely you are to default on a loan, so it’s one of the most important factors affecting whether or not they approve your applications. But the scores can be confusing, in part because there’s more than one scoring model. VantageScore is one of the most commonly used.
What Is VantageScore?
VantageScore is a scoring model founded in 2006 by the three major credit bureaus: Equifax, Experian and TransUnion. Its intent was to provide a reliable way of scoring a wider swath of consumers than competing models like FICO, thereby giving more people access to credit. According to the company’s website, the newest version, VantageScore 4.0, scores about 40 million more consumers than conventional models.
How Does VantageScore Work?
VantageScores range from 300 to 850, with higher scores indicating stronger creditworthiness and a lower risk of default. Here’s how the scores break down:
- Excellent: 781-850
- Good: 661-780
- Fair: 601-660
- Poor: 500-600
- Very Poor: 300-499
The VantageScore model takes many factors into account and calculates scores according to the weight given to each one. Here are the factors that are considered:
- Extremely influential: Total credit usage, credit balance and available credit
- Highly influential: Credit mix and experience
- Moderately influential: Payment history
- Less influential: Age of credit history and new accounts opened
Why Your VantageScore Changes
Your VantageScore can change frequently, based on your credit activity, the number of accounts you have open and the types of accounts you have open. How a particular activity impacts your score depends on how high your score was before the activity occurred. Generally speaking, a negative activity like a late payment hurts a higher score more than it hurts a lower one. That’s because you’re penalized more harshly the first time you have a particular negative activity, and a person with a high score is more likely not to have had a prior negative activity.
Some activities, like getting a car loan or a mortgage loan, can help a low score by indicating a lender’s faith in the borrower. The same activity can hurt a high score, which is often associated with multiple active account types, thereby increasing the risk of default.
Good To Know
Watching for changes to your score is a good way to stay on top of your credit. However, VantageScore recommends that you track not just how many points your score increases or decreases from month to month, but the ranges of score changes that might result from each credit activity as well.
Who Uses VantageScore?
A wide variety of financial institutions and other companies use VantageScore. Credit card companies make up the largest category of users, followed by banks, personal and installment loan companies and mortgage and auto lenders.
Outside of financial institutions, the largest category of users is consumer websites where you can access your scores. VantageScore is also used for screening tenants and telecommunications and utility customers.
VantageScore vs. FICO Scores: What’s the Difference?
VantageScore and FICO scores both range from 300 to 850. But the scores are calculated in slightly different ways.
Factors Used in Score Calculations
Both companies weight some factors more than others, but whereas VantageScore assigns each factor a level of influence, FICO assigns a percentage. In addition, FICO weights factors differently than VantageScore does. Here’s a side-by-side look:
|Total credit usage, balance and available credit||Extremely influential||Payment history||35%|
|Credit mix and experience||Highly influential||Account balances||30%|
|Payment history||Moderately influential||Age of credit history||15%|
|Age of credit history||Less influential||Credit mix||10%|
|New accounts opened||Less influential (and less influential than age of credit history)||New accounts opened||10%|
Credit History Needed To Have a Score
You won’t have a FICO credit score unless you have an account that has been open for at least six months and has been reported to the credit bureaus within the last six months, according to Equifax. A VantageScore only requires an account that has been open for at least one month and an account that has been reported to the credit bureaus within the last 24 months, so you can get a VantageScore a lot sooner.
VantageScore doesn’t consider paid collection accounts, but it does use unpaid accounts in its calculations. FICO, on the other hand, considers paid and unpaid accounts, but only if the original balance was $100 or more, Equifax noted.
Multiple Hard Inquiries
Each time you apply for a loan, the lender pulls your credit history in what’s known as a hard inquiry. Credit scoring models sometimes count multiple hard inquiries occurring within a short period of time as a single inquiry to avoid penalizing you for shopping for a good deal. But FICO and VantageScore have different policies for what kind of loan inquiries they treat this way and how long they give you to shop.
FICO’s policy includes mortgage, car and student loan inquiries made within 45 days, according to Equifax. VantageScore includes a wider variety of credit, including credit cards, but only gives you 14 days.
Although VantageScore and FICO use the same range of scores, they break them down differently.
Where To Get Your VantageScore
You can get a free copy of your VantageScore from a number of providers. LendingTree, Nav and Credit Karma are some non-lender providers that offer VantageScore 3.0 from one or more credit bureaus. Capital One, Chase, OneMain Financial and U.S. Bank provide VantageScore 3.0 to customers, visible when you log in to your account.
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- VantageScore. "How Credit Scores Work."
- Equifax. "Are FICO Scores and VantageScore Different?"
- CNBC Select. 2020. "6 reasons why your credit scores are different and which one matters most."
- Consumer Financial Protection Bureau. 2019. "Credit score myths that might be holding you back from improving your credit."