There are so many credit scoring models out there, it's easy to lose track. As a result, the VantageScore may be a bit of a mystery to you. We're here to shed light on this FICO Score competitor and its latest model, VantageScore 3.0.
First off, you may be thinking, "Wait, I have more than one score?" Yes, you do. With dozens of lenders creating their own models based on the type of credit an applicant is looking for, you could easily have hundreds of scores. Add the multiple versions of scoring models the credit bureaus create, and you can see why there isn't one single score to rule them all.
There is only one score model that was created by the major credit bureaus though, and that's where the VantageScore comes in. The first version of this generic scoring model was introduced in 2006 and developed by the three major credit bureaus - TransUnion, Equifax and Experian - with the goal of providing more consistent scores.
So what is VantageScore 3.0 all about? Let's get right to it!
Scores More People
VantageScore boasts that its 3.0 model is more predictive and can score up to 30 million more people than other models. It accomplishes this by incorporating a broader set of credit-related data and reviewing credit activity from the past 24 months. In some cases, the model can look even further back than that too. Consumers who forget to use their cards will be happy to hear that the model also utilizes credit activity data that's older than 24 months but still predictive of possible credit risk. This is a boon for many consumers who may have "thin file" credit reports, are new to credit or who are rebuilding their credit health.
Utilizes A New Scale Range
When comparing VantageScore 3.0 to 2.0, the most visible difference is probably its new scale range. While previous versions of the VantageScore used 501 to 990, the new scale ranges from 300 to 850, which is more aligned with common expectations. Jim Akin, senior manager of digital communications at VantageScore, explains that when they consulted consumers, people said they were more familiar and comfortable with the 300-850 scale range. In addition, many lenders use automated systems that accept scores that line up with this range.
Says Goodbye to Paid Collections
Collections accounts that have been reported as paid in full will no longer factor into your VantageScore calculation. While paid collections accounts can still remain on your report for up to seven years, the decision to not count them in the VantageScore 3.0 model remains a big deal. With this new model, consumers trying to move forward from past mistakes with debt won't be quite so burdened on a score level, at least.
Weighs Familiar and New Factors
The VantageScore 3.0 model covers very familiar territory and also breaks some new ground. Here, we rank the factors that impact the score. Keep in mind that each factor can be weighed differently, depending on your personal credit situation.
Payment history (extremely influential): This factor still comes in at #1 as a predictor of risk. Late payments remain on your report for up to seven years for a reason. Creditors use your score to help determine how likely you are to pay your debt, so a history of untimely payments usually raises a red flag.
Age and type of credit (highly influential): This factor refers to your account mix and length of credit history. The key idea is to maintain a variety of account types, like credit cards and loans, over time.
Credit utilization (highly influential): Your utilization percentage is calculated by dividing your balances by your available credit. It's generally recommended to keep your balances under 30 percent of your total credit limit.
Total balances (moderately influential): This looks at the balances of both current and delinquent debt. Similar to utilization, reducing the amount of debt you owe can help improve your score.
Recent behavior (less influential): This factor looks at how many credit accounts you've recently opened and the number of hard inquiries placed on your file.
Available credit (least influential): This is the amount of credit you have available at your disposal.
As with other credit scores, VantageScore does not look at personal information, such as race, religion, salary, employment history and residential address history, to calculate a score.
More than six billion VantageScore credit scores were used by lenders and other industry participants, including seven of the top 10 largest financial institutions in the U.S., in the 12-month period from July 1, 2014 to June 30, 2015. For you, this means that if you haven't already been, it would be wise to start paying attention to your VantageScore credit score.
If you pull your VantageScore credit score from different bureaus, you may notice that they might not match. The scoring model was developed to apply consistently across the three major credit bureaus and was created using credit information from all three companies. However, the fact remains that information between bureaus doesn't always match for various reasons. And remember, it really depends on your personal situation. If you're applying for a credit card, a lender may use their own particular spin on a model. But if you're seeking a mortgage, a lender can use an entirely different score.
With so many different scoring models out there, what matters most is the information in your credit reports. With Credit Karma, you can access your updated TransUnion and Equifax reports weekly to help you track changes over time.
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