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Home » Credit

What is a VantageScore?

Last updated by on 9 Comments

I’ve received a positive response from people who signed up for Credit Karma’s free credit score service after I gave a Credit Karma review based on my own experience.

Indeed, Credit Karma is pretty awesome, but a few people had questions around the ‘VantageScore’ component that is an added bonus within your account. I had wondered what a VantageScore is myself, so I did a little research and thought I’d share what I found out.

Let’s first go to the source. According to the official VantageScore website, “Created by America’s three major credit reporting companies, VantageScore’s highly predictive model uses an innovative, patent-pending scoring methodology to provide lenders with a consistent interpretation of consumer credit files across all three major credit reporting companies and the ability to score a broad population. This means lenders can help more creditworthy borrowers, and millions of Americans who use credit infrequently can be accurately scored.”

OK, that was a lot of business speak, but here’s the reality: VantageScore was put together by the three credit bureaus – Experian, TransUnion, and Equifax in 2006 in order to compete with the Fair Isaac Corp. Fair Isaac models the FICO score, which had come to dominate the market as the preferred score used by lenders when issuing credit. VantageScore is FICO’s competition. The VantageScore consortium wants a piece of that pie.

Regardless of motives, more lenders are increasingly using VantageScore to rate your credit. It’s to your benefit to know what a good score is and how you are rated so that you can shop around and improve your VantageScore.

What is a Good VantageScore?

Whereas the FICO scale runs from 300 to 850, VantageScore starts at 501 and runs to 990. And how good your VantageScore is falls into the following categories:

  • 901-990 = “A” credit = Super Prime
  • 801-900 = “B” credit = Prime Plus
  • 701-800 = “C” credit = Prime
  • 601-700 = “D” credit = Non-Prime
  • 501-600 = “F” credit = High Risk

Remind you of grade school a bit?

You can see your score in Credit Karma and how it ranks nationwide. You can see a VantageScore range and national distribution. Here’s a screen shot.

VantageScore

What Factors Into your VantageScore?

VantageScore is a predictive modeling tool and recently “upgraded” to VantageScore 2.0 (mmm…. software analogy).

VantageScore factors the following into your score.

  • Payment History: Have you consistently paid your accounts in a timely manner?
  • Utilization: How much of the total credit available to you are currently using?
  • Balances: What is the total of your current and delinquent account balances?
  • Depth of Credit: How long is your credit history and is there a varied mix of credit types?
  • Recent Credit: How many recently opened credit accounts and credit inquiries do you have?
  • Available Credit: What is the total amount of credit that you currently have access to?

Specifically, they are factored via the following breakdown:

vantagescore_factors

Why Does VantageScore Matter?

When you go to apply for credit your lender is going to look at your credit score. Your FICO score was the primary method that most lenders used for a long time.

Exact VantageScore market share versus FICO is not known, but according to VantageScore in May of last year, “four of the top five lending institutions and eight of the top 25 financial institutions are using VantageScore.” If that’s true, they’ve come a long way since 2006.

VantageScore currently claims to service:

  • 4 of the top 5 financial institutions
  • 5 of the top 5 credit card issuers
  • 2 of the top 5 auto lenders

The bottom line is the only score that matters is the one your lender is using. If it’s FICO, then you should worry about your FICO score. If it’s VantageScore, then worry about that. If it’s one of the individual credit bureaus – then worry about that one. Ask every company you apply for credit from which score they use.

It’s also why it pays to shop around for the best rate. If one lender is using FICO and another VantageScore and you have a better FICO rating, for example, you might get a better rate offer from the lender that uses FICO.

Credit Karma offers you a TransUnion and VantageScore for free. The others, you’ll have to pay for. Don’t do it unless you have to and go only through the official websites if you do.

VantageScore Discussion:

  • Have you borrowed from a lender that uses VantageScore?
  • Did you find a difference in how you were rated between FICO and VantageScore?
  • Did you shop around based on whether your lender used FICO or VantageScore?

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About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 7,500+ others by getting FREE email updates. You'll also find every post by category & every post in order.


9 Comments »
  • I wasn’t really aware of vantagescore. I just thought lenders were still using FICO scores. I wouldn’t have even thought to ask whether they are using FICO or vantagescore.

    It would be very interesting to know the true market share for vantage score. I’m sure that the three credit bureaus are pushing hard for lenders to use this vantagescore.

  • Wizard Prang says:

    More of the same… another “I-love-debt” score.

    I wonder how someone with a paid-for house and a million in the bank would score…

  • My mortgage was through B of A last year, and they were still checking my FICO…I guess they are the 1 in 5 lending institution.

  • Alex Hung says:

    It was excellent to know how Vantage score coexists with the traditional FICO score. And to have a better deal, the advice given on how a borrower should ask if the lenders are using which credit score tool seems a nice tip. Thanks for such a useful mention!

  • I had no idea what the Vantage score was, thanks for the resources! I bet my VS is low, because I have great credit scores through FICO and get denied by credit card companies!

  • Andrew says:

    I had never heard of a VantageScore. Thanks! I have never encountered anyone who uses it though. Most of the banks I use use Experian for the FICO score. Which do you think is better based on what you know of each?

  • Melissa says:

    I work for a bank and, like most other institutions, we use FICO.

    I believe the VantageScore can be very misleading to a lot of consumers. Occasionally I will speak to an irate customer who wasn’t approved for a loan. They will tell me their “credit score” is 780. However, one look at the application may show the FICO much lower – approximately 620 for example. (not an exact figure). No wonder they’re upset and confused!

    There are many consumers who get the free VantageScore and it’s not clearly differentiated from FICO. I suspect this is intentional (at least in part) from VantageScore, but it truly doesn’t serve the consumer.

    The whole thing can be very confusing, even for a banker. I truly empathize with loan applicants who are overwhelmed by the calculations used in approving a loan.

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