What is Vantagescore 3.0?

VantageScore is a consumer credit scoring model, created through a joint venture of the three major credit bureaus and companies (Equifax, Experian and TransUnion). The model is managed and maintained by an independent company, VantageScore Solutions, LLC, which was formed in 2006 and is jointly owned by all three companies. It is the model used by lenders, banks and financial institutions to know if people are eligible to receive credit or not.

The VantageScore models compete with the credit scoring models produced by Fair Isaac Corp.: the FICO credit scoring model. Like the models developed by FICO, the VantageScore models work with data stored in consumer credit files maintained by the three national credit bureaus. VantageScore models and FICO models use statistical analysis of that data to predict the probability that a consumer will default on a loan. The VantageScore and FICO models represent the risk of a loan default in the form of three-digit scores, with higher scores indicating lower risk.. VantageScore and FICO use different proprietary analytical methods, and scores from one system cannot be translated into one another.

What is FICOScore?

Most people associate credit scores with FICO, and with good reason. And while there are many credit scoring models, the other leading scoring model is VantageScore®.

Fair Isaac Corporation (formerly Fair, Isaac and Company) introduced the first general-purpose credit score in 1989, and FICO® Credit Scores have been used in a wide range of lending decisions ever since. But FICO® Scores aren’t the only credit scores you’ll see. The other main scoring model is VantageScore®, the third version of which, VantageScore 3.0, is widely used today.

What is VantageScore 3.0?

Many wonder what Vantage Score means? To answer that question, let’s back up a bit.

It all started in 2006, when the three major consumer credit reporting agencies – Experian, TransUnion and Equifax – came together to create the first iteration of the VantageScore® credit scoring model.

VantageScore went through several versions before VantageScore 3.0 debuted in 2013. The new model became so successful that, according to a research study by consulting firm Oliver Wyman, more than 6 billion VantageScore® credit scores informed lending decisions in the 12-month period from July 2016 to June 2017.

The fourth and latest version of the VantageScore® model, VantageScore 4.0, debuted in 2017, but many lenders continue to rely on VantageScore 3.0.

With this in mind, let’s review some of the basic information you should know about how VantageScore 3.0 works and how it differs from other credit scoring models.

VantageScore 3.0 Point Range

credit score Rating % of people Impact
300-499 Very bad 5% Applicants may not be approved for the credit.
500-600 Bad twenty-one% Applicants may be approved for some credit, though rates may be unfavorable and with conditions such as larger down payment amounts.
601-660 Acceptable 13% Applicants may be approved for credit but probably not at competitive rates.
661-780 Okay 38% Applicants are likely to be approved for credit at competitive rates.
781-850 Excellent 23% Applicants are more likely to receive the best rates and most favorable terms on credit accounts.

VantageScore 3.0 vs Other Scoring Models

credit factor VantageScore 3.0 VantageScore 4.0 FICO® Score 8 FICO® Score 9
Utilization rate Very important Equally important Very important Very important
Historical utilization rate and payment information (trend data) does not impact It can affect your score does not impact does not impact
Collection accounts Ignores paid collection accounts Dismiss paid collection accounts

Ignores medical collection accounts that are less than six months old

Weighs unpaid medical collection accounts less than other types of collection accounts

Ignores low-value “nuisance” accounts that had an original balance of less than $100

Treat medical collection accounts, including those with a zero balance, like other collection accounts

Ignores paid collection accounts

Weighs unpaid medical bills less than other types of collection accounts

A tax lien or judgment Can have a significant impact They are less important than before, but can still have a significant impact Can have a significant impact Can have a significant impact

How is your VantageScore 3.0 credit report calculated?

VantageScore 3.0 credit scores range from 300 to 850 points. Previous iterations of the VantageScore® model featured a different range, but VantageScore 3.0 adopted the 300 to 850 range – the same range as most FICO® Scores – to make it easier for lenders to use.

Although individual credit scores are based on a complex series of calculations, VantageScore offers some insight into how various credit factors are used to calculate a VantageScore 3.0.

Generally, here is how the categories can be broken down.

Payment history (about 40%)

The most important factor in your VantageScore 3.0 credit score is payment history. In other words, are you consistently paying your bills on time, or are you frequently delinquent on your bills?

Payment history is usually represented as a percentage that shows how often you’ve made payments on time. Given the weight of this factor, late or missed payments have the potential to significantly hurt your credit score.

Age and type of credit (around 21%)

VantageScore 3.0 also takes into account how long you’ve had different types of credit accounts open. (Don’t worry – it doesn’t refer to your actual age).

Ideally, lenders like to see long-term established lines of credit. Having a variety of account types is an advantage — as long as you keep up with your payments — since lenders also like to see that you’ve used a mix of accounts on your credit responsibly.

Credit utilization (about 20%)

Credit scores are intended to help lenders get a better idea of ​​the type of borrower you might be. If you are consistently using a large percentage of your available credit at any given time, it can negatively affect your VantageScore 3.0 credit score. Experts generally recommend a credit utilization ratio below 30%.

Balances (about 11%)

This factor refers to the total amount of recently reported balances (current and delinquent) on your credit accounts.

Lenders generally like to see low balances on your other credit accounts, as it suggests that you are more likely to make on-time payments each month. Although the best method is to pay your balances monthly.

Recent credit (about 5%)

Have you applied for a new credit card lately? Perhaps you have requested a personal loan? Lenders may want to know these kinds of things, as your recent credit activity, including recently opened credit accounts and credit inquiries, can be an indicator of future financial performance.

Available credit (about 3%)

Although not a huge factor, lenders generally like to see that you’re only getting the credit you need. According to a report from VantageScore® Solutions, top consumers are left with $20,000 to $22,000 of unused credit.

How does VantageScore 3.0 compare to FICO® models?

There are many similarities between the VantageScore® and FICO® credit scoring models. Not only are both typically calculated on a scale of 300 to 850 points (the latest FICO® Scores can range up to 950), but both models place a lot of emphasis on payment history and credit utilization.

For comparison purposes, let’s look at how FICO weighs various factors in your credit scores. Some of these factors may have slightly different names than those listed above, but they refer to similar information on your credit reports.

Payment history: 35%

Amounts due: 30%

Length of credit history: fifteen%

New credit: 10%

Other factors, such as the types of credit used: 10%

While much of the information is comparable, a big difference may be in the way VantageScore and FICO evaluate data in order to generate scores, particularly for people without much credit history.

If you have little credit history, there’s a good chance you don’t have a FICO® Score. FICO requires at least six months of account data reported to a credit bureau within the last six months before a score can be established.

VantageScore, on the other hand, may be able to provide more people with a credit score using just one month of history on at least one account reported within the previous 24 months.

Do you have a collection account on your credit reports? VantageScore may be a bit more forgiving of your situation. Unlike the FICO® 8 credit scoring model, VantageScore 3.0 will ignore any collection account that has been paid in full. (FICO® 9 also ignores any collection accounts that have been paid in full.)

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