What is VantageScore 2.0?

What is VantageScore 2.0?

UPDATE: Credit Karma now offers VantageScore 3.0 credit scores from TransUnion and Equifax. Check your scores today!

In the 1970s, the Fair Isaac Corporation created the first credit scoring system, dubbed the FICO score. This has since been standardized as the industry's leading credit score model to assess potential borrowers. More recently, the VantageScore was created in collaboration with the three major credit bureaus (TransUnion, Equifax and Experian) as a new generic proprietary credit score model marketed as a more "consistent interpretation" and "accurate score" than FICO. As Credit Karma provides you with your VantageScore for free, here's what you need to know about it. Note that these details are based on the VantageScore 2.0 model.

Credit Scores Vary

First of all, it's important to keep in mind that you do not have one "true" credit score. There are actually over 100 different credit scoring models used in the industry that varies by bureau, reporting agency, model type and lender. Each model uses a different algorithm that weighs each part of your credit report differently, which explains why you may have a 750 from Credit Karma and a 762 from FICO. We've previously addressed how to understand the credit score differences; there are indeed many different credit score models, but they are all highly correlated. They use different ranges, different formulas, and the information found on your credit report can differ from bureau to bureau, but all the models aim to assess your credit history and translate it into your 3-digit credit score number.

The VantageScore

The three major credit bureaus offer their own proprietary models but usually provide the FICO score to lenders. The VantageScore was created as a consistent credit score model across the three bureaus to compete with the FICO score and offer lenders a more standardized score.

The VantageScore is being touted as "The New Standard in Credit Scoring," and it can potentially become big if the bureaus can compete successfully with the stranglehold FICO has on lenders. It just depends on whether lenders will be willing to change to a different model.

The VantageScore offers additional features that the FICO model doesn't incorporate, such as predictive scoring and a 24-month review of credit history. Here are some of the main differences between the two competitors:

VantageScore
FICO
  • Score range is from 501 to 990
  • VantageScore uses letter grades to spell out your credit health: 901-990 = A or Super Prime, 801-900 = B or Prime Plus, 701-800 = C or Prime, 601-700 = D or Non-Prime, and 501-600 = F or High Risk.
  • Takes into account 6 components of your credit report: payment history, utilization, balances, depth of credit, recent credit, and available credit.
  • VantageScore claims to score thin file consumers more accurately by providing predicative scores for consumers with limited histories
  • FICO range is from 300 to 850
  • No letter grades for FICO
  • Takes into account 5 components of credit report: payment history, amount of debt, credit history, types of accounts, and inquiries.
  • Thin file consumers often cannot generate a credit score at all, or are scored with inflated, high scores because they have few credit actions on file



Bottom Line

The VantageScore's particular credit scoring method is especially good news for consumers with thin files and consumers who may have prior negative actions against them but have a good recent history.

Again, please keep in mind that the VantageScore is one of dozens of models in use, and your VantageScore will still vary between the three credit bureaus. While they use the same scoring model, the information on your credit report may differ from bureau to bureau.

What is most important is that you monitor and manage your credit health by checking your credit score every few weeks. Keeping track of your credit score over time, not just once or twice, will give you the most valuable insights into how to adjust your credit habits to build towards a healthy score.

Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

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I see a lot of misconceptions in these comments. Just wanted to share a few things I've learned about the credit game after being pretty stupid about it in my twenties. As far as the scores themselves go, people need to understand that these fluctuate routinely and there are dozens and dozens of different models out there used by lenders. There's FICO, FAKO, Vantage, and many, many others. They all use different algorythyms which result in different scores. The credit score websites are the same way and can give you a different score for the same bureau as well between different sites depending on which model they are using. This site gives you a good glance at your FICO and vantage score and a good baseline to judge where you're at and that's all. If you are going to be applying for a mortgage or another major purchase, they'll pull the scores they will use (usually a version of FICO) and disclose them to you as part of the application process. If you want to check them in advance, you can go to myfico.com and order them, but they're around 20 bucks for each bureau, so you probably only want to do this if you are looking at a major purchase. If not and you just want to monitor your transunion, this site is great (and best of all, it's free). You can use credit sesame to monitor your experian score for free as well. I am not aware of a free site for Equifax as of yet.  In this day and age of identity theft, I would also recommend paying for an identity monitoring service as well. I use Identity Guard and pay 15 bucks a month (got a discounted rate for singing up through next advosor). For this I get active monitoring that lets me know if anyone ever tries to apply for a loan or credit card in my name and all three FICO scores updated quarterly. It's worth it to me for the peace of mind knowing that if an identity thief does somehow get a hold of my information and tries to start opening accounts I can cut if off immediately before the damage mushrooms. Use this site and credit sesame to keep an eye on your transunion and experian scores for free and pay for an identity monitoring service each month if you can squeeze the extra 15 or 20 bucks a month in and you'll build a very good active picture of your credit and how it changes over time.

In regards to rebuilding credit (the stage I am currently in) and using credit in your favor, start with credit cards if you're in the hole. You  might have to get a secured one if your score is really, really bad (I didn't have to do this, but some people have no choice). Start with one and build from there. Use the card for 6 months to establish a baseline good credit history that shows you are paying on time. As your score moves up, you'll qualify for non-secured cards. You'll have to start with the cards that have an annual fee, however most of these still have a 12 to 15 month 0% APR introductory period. Use that period to make purchases each month of around a hundred bucks or less. Whatever keeps you under 20% of your total available balance (this puts you in the excellent range of your credit utilization ratio, which will increase your score the quickest). Once the APR period runs out, only make one or two small purchases each month and then pay the balance off in full each month. You need to do this because most credit card companies will mark a card as inactive and stop reporting it to the bureaus if you don't use it for a certain period of time. Once you move your score up enough to qualify for the no annual fee cards, you can either keep these accounts open if you don't mind the annual fee, or close them all together. If you do decide to close them, make sure you don't do it before you have opened at least the same amount of accounts with no annual fees. Remember, the amount of active and paying on time accounts on your credit report is a major factor in your score, so you want to keep this in mind when balancing the merits of closing the account and eliminating the annual fee versus removing an account with a good paying history from your report. Once your score is in the good/excellant range you can cancel these secured/annual fee cards with no hesitation just as long as you have at least a couple of other credit cards with no annual fee in good standing still open after you cancel them.

Once your score moves up enough to qualify you for the no annual fee rewards cards, you can start using the credit game in your favor. I like the cashback cards like Chase Freedom and Capital One Quicksilver. These types of cards give you a free hundred bucks if you spend a certain amount within the first few months. I get gas and groceries on the card for the first few months in order to hit the qualifying amount and just pay the balance with the money I would have used for the same thing out of my paycheck. Once I get the free sign up cash, I dial it back and keep it under that magical 20% or less of the balance each month while getting cash back on everything I buy. A lot of these cards have special categories that rotate on a quarterly or annual basis where you can get as high as 5% cash back on anything you buy. There are cards in all sorts of other areas of interest. I like the NFL card that gives me 20% off of everything I buy at NFL.com amongst other things. Once you reach the stage where can can qualify for these types of cards, you can earn all sorts of benefits from discounts to cash back that are beneficial to you and really make the annoying credit game work in your favor.

A few other tips...

Don't get discouraged. Even if your score is so low that you only can qualify for a secured card, you CAN get your score up to the exellent range and not have to spend a lifetime getting there. You just have to be disciplined and follow a plan.

Stay away from the debt consolidation companies. A lot of these companies do more damage to your credit than they do help. If you are delinquent, negotiate with the company you are dleinquent with directly. Most of the time you can pay off your debt by only paying 25% to 50% of what you owe. Once you are delinquent enough they pull your debt off of their ledgers as a tax write off and after that point they'll be happy to take whatever additional amount they can get back (within reason) because they already wiped you off the books as an asset. Always negotiote directly with your debtor if possible and avoid collection agencies and credit consoldication companies. If a debt collector is harrassing you and you are finally in a position to pay the debt, ignore them and go straight to the company you have the debt with if at all possible. If you do have to deal with the debt collector, make sure they have the delinquent account erased from your report once you have paid it in full and not just reported as paid. They will tell you they cannot do this, but that is quite frankly bull. Make sure you negotiate this and get it in writing before handing over payment because they do frequently lie and tell you they will do something that they have no intention of doing once they have your payment. If you can't pay the debt, you do have the right to instruct them to stop calling you. If they are threatening you with legal action, this is often illegal and you can force them to stop. Research your rights. Google search consumer credit protection rights and go from there. Arm yourself with knowledge. Even if you're in a horrible financial position and have multiple delinquencies, you still have rights and can dig yourself out. Make sure you know what they are and don't let the debt collection and credit consolidation vultures prey on you.

Be careful with balance transfer cards. A lot of people use them to try to consolidate debt on high interest cards, but most of them have fees attached. Usually around 3 to 5 percent of the balance you are transfering and most of them hit you with an interest charge on the full amount if you don't pay it off in a cretain amount of time. They can work in certain situations, but only use these as a last resort and make sure you read the fine print and know all of the possible penalties and interest charges before taking the plunge.

Never get a cash advance with your credit card. The fees are absolutely ridiculous and you are completely screwing yourself anytime you do this.

Be wary of store cards as well. Only use them if you really are going to be spending a lot of money at that store and doing it for many years into the future. Some of them can be very beneficial if you really do spend a lot and do it frequently at the store, but quite a few of them do not have the benefits to make it worth the interest and other fees they charge unless you really are spending in large amounts and doing it frequently. There are some good ones out there though, not all are bad. Just always make sure you read the fine print and know all of the fees and charges before signing up for one (or any other credit card for that matter).

Always keep your cards under 20% of the total balance each month. You can go as high as 40% in a crunch and it won't hurt you too bad. Even up to 60% won't damage you too harshly (but it will sting), but anything over 60% of the total balance will steadily bump your scores back down. Credit utilization ratio is very, very important. Once you've dug yourself out of the hole and are amongst the good graces of the good/excellant range, STAY DISCLIPLINED. As long as you keep those accounts paid on time and under 20% each month, you'll always be in good graces and will qaulify for the best car, mortgage, and cash loan interest percentages and terms that are out there and will save yourself thousands and thousand of dollars when making major purchases like a car or a home. For a mortage good credit can mean the difference of staggering amounts of money over the course of a thirty year mortgage.

It can seem almost impossible to dig out, but you can do it. Start small, build the amount of accounts that are active and are being paid on time each month, and stay disclined with your spending. ALWAYS pay your bills on time. If you do this your score will climb steadiy over time and you WILL get to the point where it's back in good/excellant standing. Once you're finally there, stay within you limits, use the cash back and or other rewards and bonuses to your advantage, and use the credit game to your advantage intead of theirs.

Reply by
oshee5

1 Contribution
29 People Helped
Helpful to 29 out of 30 people

This advice is right on the money,just one thing to add , when making small purchases and paying them off every month people get discouraged when thay don't see their score go up and they're paying off the balance on or before the due date,that's because the bank has a different reporting date to the credit agencies..So if they report on the 13th but your paying the balance on the 20th,they'll always be reporting you with a balance,so call the bank and find out their reporting date..

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Helpful to 632 out of 662 people

I disagree about the statements made by commentors that it takes a long time to build credit. Ten years ago I was totally disabled from a complete neurological virus. My credit was excellent before I shut down with illness, and then totally wiped out as the illness continued.

I went to a local credit union, after being totally disabled and unable to work. My only income was some savings and a disability check each month. I was "totally upfront" about my illness, and simply stated I wanted to rebuild my life. I started with a $1000. loan repayable in 18 monthly payments. I paid the loan off in nine months. Then, I asked for a car loan. I used my van to get an $1800 loan repayable in three years. I paid off the loan in 13 months. I also had saved one half of my disability checks by purchasing nothing for four years. I was sick, bedridden, and didn't waste my money on fast food, cable tv, big screen tv, magazines, newspapers, and all the other crap people waste money on. I also managed my diet extemely well, and saved lots of money cause I don't use alcohol, cigarettes, fast food, and other junk. You would be AMAZED at how much you can save just by not buying things you dont really need. Anyway, I got a credit card for $5000 at 8.9 percent interest, fixed, at the time of my first loan by simply putting my savings in a credit union account.

People are broke. It's a fact of the times. The banks and credit unions, shop around, will work with you. Just try to establish a mutual relationship with them. 

FINALLY, DONT GET "HOSED" ON INTEREST RATES FOR LOANS JUST BECAUSE YOU WENT BROKE. If one credit union won't deal with you, then someone else will. SOMEONE WANTS YOUR MONEY. They will deal with you. Just make your payments, pay off loans well ahead of time, and keep saving money each month. HOWEVER, DONT TAKE A TEN PERCENT LOAN UNLESS ITS YOUR FIRST ONE, AND YOU PAY OFF THE LOAN AFTER NINE MONTHS.

YOU CAN DO IT. JUST DONT START BUYING JUNK ALL THE TIME. YOU DONT NEED IT. FINALLY, THE FASTEST WAY TO GET MONEY IS TO SAVE IT. SAVE SOME EACH MONTH--LIKE $50, OR MORE. JUST KEEP PUTTING SOME IN YOUR SAVINGS AND PAYING YOUR LOAN PAYMENT.

WITHIN A YEAR, THE CREDIT UNION WILL BE GIVING YOU ANY LOAN YOU WANT, WITHIN REASON.

GOOD LUCK.

2 Contributions
62 People Helped
Helpful to 60 out of 66 people

Thank you omaha44. I am going through a divorce and a foreclosure.  In a nutshell A NIGHTMARE!  I am trying to look for a place to live, and with a 518 credit score its not happening.  I did find a For Sale By Owner/ To Rent (same property).  Called the owners, was upfront with them. I have the first month's rent and security deposit.  I was hoping for a rent-to-own, however, they just want it either sold asap, or rented asap.  I am willing to rent and gain someone's trust back by making rental payments on time for the one year lease.  I would love to own it.  Any suggestions regarding this?  I definitely agree that paying off small loans on time is the way to go.  I too have scaled back, no cable, no eating out, I even have been cutting my own hair, etc... It has been hard, but I just want someone to give me a chance since I was dilusional about someone else paying the mortgage on time etc.  I need to take responsibility for what gets paid on time now, and I'm doing it, its just a slow process.  Thanks for any feedback you can give me.  Good Luck omaha44! 

Reply by
burrism

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Helpful to 65 out of 71 people

My credit has not been good .  I learned as an adult what it means to establish good credit.  I was 17 when I got my first charge card and was foolish in the way that I handled it.  Lesson learned.

THANK YOU, THANK YOU, THANK YOU for the encouragement that I certainly needed to help me on the path to re-establishing my credit.

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24 People Helped

Helpful to 24 out of 24 people

all of my scores are excelant except Vantage which is a B.  I have never paid late and I recently paid off my mortgage so that I have no debts other than credit cards which I pay in full, even before the due date.  Credit scores are a farce when 60 years of paying perfectly rate a B

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Helpful to 42 out of 46 people

The whole Credit Score Oppression is created by banks and Credit Card companies.  My Vantage Score just dropped 25 pts for no reason I can see.  Unless reducing my debt down to 20% from a high of 53% is a negative??? And guess what it is a negative.  My husband had a score of 786 until he paid off his debt.  Now his score has dropped 20 points and he has a B now instead of an A.  All because he has no credit card debt.   It's stupid

I had a score of 805 and had credit card companies reducing my credit limits like crazy before the new laws went into effect 2 years ago, thereby making my utilization of credit sky high based on my new lower lines of credit.  It's a game and  I no longer want to play as the rules keep changing.  

I pay cash for everything and only use a AMEX card that I pay in full every month.  SCREW the BIG 3, I don't care about my score and the rest of you should do the same.  It's a hostage situation with this crap. 

By the way I have never paid late or maxed out a card.

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15 People Helped

Helpful to 15 out of 15 people

When is Credit Karma going to report the new Vantage Score 3.0 that has been in affect for all of 2013?

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