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What is a VantageScore?

VantageScore is an alternative to FICO and is used to assess your creditworthiness.

Launched in 2006 as an alternative to the FICO score, VantageScore was developed by the three major credit bureaus — Equifax, Experian, and TransUnion — and is used by lenders, landlords, and financial institutions to assess your creditworthiness. VantageScore, like FICO, gives you a three-digit score, on a scale of 300 to 850.

VantageScore 3.0 vs. 4.0

Over the years, VantageScore has gone through numerous iterations, most recently the transition from VantageScore 3.0 to 4.0.

VantageScore 3.0 expansion

When launched, the VantageScore 3.0 expansion meant that 30 to 35 million more adults were able to get access to credit than traditional scoring models as it was able to assess all of their credit history rather than just the last 24 months.

This was expanded since conventional models don’t look at history on a credit file that’s less than six months old.

VantageScore 4.0 expansion

Much like the previous model, VantageScore 4.0 opened up credit scores to approximately 40 million more adults than conventional scoring models.

We spoke with Jeff Richardson, senior vice president of marketing and communications at VantageScore, to find out how it has changed.

One of the innovations that Richardson was most proud of with VantageScore 4.0 is its use of trended data, which instead of just looking at what was reported about you last month, it looks at the trajectory of your behaviors.

“A good example is the holiday shopping season. A lot of people are heavier credit card users over this period. Conventional scores or older scoring models would say, ‘Oh, my gosh, Jeff’s balances and his utilization rate are very high.'”

“But that was just my usage in December and January. If you look at the trajectory over the past two years, it shows that I was a good manager of that account. So, taking into consideration the history of performance on the account, not just what it looks like in the previous month, is a huge differentiator with VantageScore 4.0.”

How VantageScores are calculated

Unlike the FICO score, VantageScores are calculated using six major factors:

  1. Payment history. This is the most important factor, which makes up 41% of your credit score. This tells lenders about your repayment behavior and whether your past payments were satisfactory, delinquent or derogatory.
  2. . This is how much of your available credit you’re using and accounts for 20% of your score. A good rule of thumb is to keep the proportion of credit used or owed on accounts under 30%.
  3. Age and mix. The age, or the length of time you’ve had your credit accounts, and the mix, or the types of credit you have, makes up another 20% of your score. A person with one open line of credit will have a harder time getting a score of 850, compared to a person who has a credit card, car loan, and a mortgage — as long as they’re in good standing.
  4. New credit. The number of new accounts you’ve opened, along with how many credit inquiries, make up 11% of your score.
  5. Balances. This refers to the amount you owe, both current and delinquent, and makes up 6% of your score.
  6. Available credit. How much credit you have access to makes up the final 2% of your score.

Vantage score calculated

What’s changed since VantageScore 3.0?

One of the main differences between VantageScore 4.0 and 3.0 is the weightings they’ve given to certain factors:

Graphic source

FactorVantageScore 4.0VantageScore 3.0
Payment history41%40%
Utilization20%20%
Age/Mix20%21%
New credit11%5%
Balance6%11%
Available credit2%3%

What’s a good VantageScore?

VantageScore 4.0 ranges between 300 and 850 and anything above 661 is considered a good score

RatingScore
Subprime300–600
Near Prime601–660
Prime661–780
Superprime781–850

How to improve your VantageScore

Improving your VantageScore will depend on where you’re starting from.

If you’re new to credit, focus on keeping your accounts open and making sure you’re paying them on time. You’ll also want to check your credit utilization, or how much of your credit you’re using. If your utilization is above 30%, bring that number down by paying down your debt early.

If you have a history of missing payments, check which accounts are delinquent and if it’s a large balance look into debt consolidation or a balance transfer credit card.

However, Richardson warns those looking at debt consolidation loans that it can be challenging to combine all your debts into one large payment, rather than having several smaller debts due periodically.

VantageScore vs. FICO

Both traditional FICO score and VantageScore are built using the same credit file information and both have the same 300 to 850 range, where lower scores indicate a higher likelihood of default.

Both scores are meant to predict the likelihood that a consumer will miss a payment on a loan.

VantageScore and FICO are different in the ways that they use your credit file data and their weightings.

One of the bigger differences is that VantageScore uses “information that’s very recent to generate a credit score early on in a consumer’s credit life,” according to Richardson.

Who uses VantageScore?

The VantageScore model helps numerous lenders evaluate the creditworthiness of their borrowers including:

  • Financial institutions
  • Credit card issuers
  • Mortgage originators
  • Auto lenders

Richardson also said that starting later this year, VantageScore “is going to be required for all mortgages that are purchased by Fannie Mae and Freddie Mac. Previously, FICO was only used for mortgage applications. But we’re really pleased that there’s no longer a monopolistic way of using scores in the mortgage market, and VantageScore is going to be one of the main scores that’s going to be used now.”

Bottom line

Keeping track of your credit score is important and it’s worth knowing both your VantageScore and FICO score and seeing how these can differ to help you get a better sense of how you can work to improve your credit score.

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