With FICO getting all the attention, VantageScores have managed to increase in reliability but not visibility.
As the industry continues to use them more and more it will become increasingly important for consumer to understand them.
Developed in 2006 in a united effort by the three major credit reporting bureaus (Experian, TransUnion, and Equifax) VantageScores is a composite credit scoring model that has been on a slow incline to catch the traditionally reliable model known simply as FICO.
Indeed, “FICO is still the most commonly used scale or scoring system,” says Steve Brobeck who is the executive vice president of the Consumer Federation of America. Mortgage lenders still lean heavily on the reliability of the FICO score, which has been the norm for more than half a century but, according to Brobeck,
VantageScore is slowly increasing in use…if your score is form a credit card issuer or even an auto loan, it might be based on the Vantage scale.
Sarah Davies, the senior vice president of product management for VantageScores reports that, “the model continues to gain traction.” As an example, she claims “many very large credit card issuers are using the score [including] four of the top five financial institutions,” which might lead you, or any consumer for that matter, to conclude that it might be a good idea to purchase a VantageScore report along with a traditional credit report. If you are thinking about it, consider these facts:
1. The VantageScore scale is very different from the other credit scoring scales
According to Rod Griffin, director of public education at Experian, “VantageScore is different in that its scale is different.” As an example, consider that the lowest possible VantageScore is 501 and the highest is 990. This is an obvious contrast to the FICO scale which ranges from 300 to 850.
This can appear to be somewhat confusing but Brobeck maintains that no matter which scale you look at the only thing that is important is “the relationship of your score to other scores from that source,” or how your score compares to others on the same scale. Furthermore, VantageScore assigns a letter grade to scores, with the hope that it will be easier for consumers to comprehend their status.
2. VantageScore takes into consideration your most recent information
In this regard, VantageScore is much like the FICO score, that they are based on credit behavior and history. Griffin says, for example, that your “payment history is the first and most important part of your credit score” (accounting for nearly 30 percent of it). An equal percentage of your VantageScore, however, is based on your recent credit behavior, with nearly 25 percent also based on the amount of credit you use in respect to the amount of total credit you have been issued.
3. VantageScore considers circumstances
This is a little difficult to comprehend but the simplest way to look at it is this: your VantageScore will be negatively affected even if something out of your control forces you to declare bankruptcy (unemployment, an injury, etc). However, the impact you experience might not be as bad as someone with a track record of poor credit management.
4. VantageScore scores the “Unscorable”
Something that truly sets VantageScore apart is the fact that it attempts to assign a score to people with very thin credit. One of the easiest ways to describe this is that someone who may have only recently received their first credit card may already have a VantageScore.
5. VantageScore provides the same information in a different way
Experian’s Rod Griffin says
Don’t get too caught up in the number.
That’s the point of the letter grade; it is just another way to present what is, essentially, the same information. This presentation is provided so consumers have a better understanding of their credit score.