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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 revolving credit balances for the last 24 months.
- The FHFA approved VantageScore 4.0 and FICO 10T for use by Fannie Mae and Freddie Mac in October 2022.
When someone talks about their credit score, they are usually referring to their FICO score, the oldest and most widely used scoring model. However, VantageScore is gaining year after year on FICO.
The second-place credit scoring model, VantageScore, had a user base of 2,500 lenders pulling 12.3 billion VantageScore credit scores from July 2018 to June 2019. From March 2021 to February 2022, VantageScore had a base of users from over 3,000 lenders pulling 14.5 billion credit scores.
The vast majority of lenders still rely on FICO scores when making lending decisions, but VantageScore is increasingly relevant. Here’s everything you need to know about VantageScore and how it works.
What is VantageScore?
VantageScore is a credit scoring model developed by the 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 your outstanding debts. This means less risk for lenders, leading them to lower your interest rates.
Comparisons are often drawn between GPAs and credit scores. The first version of VantageScore, released in 2006, actually assigned consumers a letter grade from A to F, which corresponded to a credit score of 501 to 900. It was the first of four generations of VantageScore to be released.
VantageScore 2.0 was released four years later following the bursting of the housing bubble in the late 2000s and post-recession. Fluctuating finances gave VantageScore the opportunity to update its analysis of financial profiles. It came with the same scoring system as VantageScore 1.0.
If a lender is using VantageScore now, they are most likely using VantageScore 3.0, which was released in 2014. This iteration departed from previous generations in that it removed the letter scoring system in favor of a five levels similar to FICO. It also adjusted its point range to 300-850, as did FICO.
The ranges break down as follows:
The credit bureaus released VantageScore 4.0 in 2017, although the credit world has not yet widely adopted this generation. More on VantageScore 4.0 later.
VantageScore vs. FICO
Because VantageScore was created as a competitor to FICO, they work the same way. Both scoring models operate on a scale of 300 to 850, although as we discussed earlier this has not always been the case.
“Think Pepsi and Coke,” says credit expert and former FICO and Equifax employee John Ulzheimer. “It’s so simple.”
However, your VantageScore will likely be different from your FICO score. This is because VantageScore weighs your credit score information differently. Here is the full breakdown:
While FICO and VantageScore weigh payment history equally, it’s worth noting that FICO weighs new credit — which takes into account recent and serious inquiries — twice as much as VantageScore.
Calculations aside, it’s worth mentioning that FICO is still, by far, the dominant credit scoring model. FICO claims that 90% of lenders use FICO scores to decide whether to lend money to a borrower. Ulzheimer says just because FICO leads in VantageScore usage doesn’t mean VantageScore is irrelevant.
“Being second in credit score, the space is still a very good place to be, considering the massive amount of credit scores that are used each year,” Ulzheimer said.
VantageScore 4.0 is the latest generation of the credit score model. Unlike previous models, 4.0 takes “trend data” into account. Trending credit data looks at your revolving lines of credit balances (credit card balances) over the past 24 months to predict future performance. “These data are extremely predictive of risk,” Ulzheimer says.
With one more measure to follow, the new VantageScore 4.0 compute distribution changes slightly. Here is the full broadcast:
In October 2022, the Federal Housing Finance Administration (FHFA) approved VantageScore 4.0 and FICO 10T 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 businesses.
How to check your VantageScore
Most financial institutions, such as credit card companies or banks, will provide you with your FICO score. However, since VantageScore is not as popular or widely used, your score may not be immediately available to you.
However, there are still plenty of ways to access your VantageScore for free, whether the
VantageScore website listings. For example, Credit Karma offers your VantageScore 3.0 from TransUnion and Equifax. Several places like American Express, CreditWise and Credit Sesame also offer VantageScores.
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