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What Are VantageScores and How Do They Impact You?

What Are VantageScores and How Do They Impact You?

Jenius Bank Team9/11/2023 • Updated 10/2/2024
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Understanding how VantageScores work is the first step to improving yours. Your credit score reflects how you’ve managed past debt and provides lenders with a quick way to gauge your creditworthiness (AKA, the likelihood that you’re able to repay future debts). But depending on the lender you’re working with, you may notice different credit scores. Those different scores are the result of lenders using different scoring companies. Most lenders rely on reports from two key players: the Fair Isaac Corporation (FICO) and VantageScore. Though FICO is the most common scoring model, VantageScore is gaining in popularity. Let’s look at what makes VantageScores unique from FICO scores, and some ways you may be able to improve your VantageScore.

Key Takeaways

  • VantageScore is a credit scoring model created through a partnership of three credit bureaus and is used by some lenders to assess creditworthiness instead of the FICO model.
  • VantageScores range from 300 to 850. A higher score indicates that you have demonstrated responsible financial behavior and may give you access to benefits such as lower rates.
  • Understanding the factors that make up your VantageScore could help you take steps to improve your credit score.

What Is a VantageScore?

VantageScore was introduced in 2006 through a collaboration of the three major credit bureaus, Experian, TransUnion, and Equifax. The goal was to compete against the long-established FICO credit score model. The credit bureaus developed this new scoring system to give those who may not have used credit before, such as college students or immigrants, faster access to a credit score.1 This scoring system only needs a month of data to calculate a score for a consumer. The FICO model, on the other hand, typically needs at least six months of data to generate a score.2VantageScore also aims to make credit scores more consistent. Since these scores pull data from all three credit bureaus, consumers see more consistent scores when going between lenders who use VantageScores. FICO scores, on the other hand, create bureau-specific scoring models, meaning your score may be slightly different depending on which bureau the model is pulling data from.

What Is VantageScore 3.0?

Initially, the VantageScore model used a score range of 501 to 990, differing from FICO’s 300 to 850 scale. This made interpreting both scoring models more difficult for consumers and created less consistency for lenders when reviewing applications. However, in 2013, VantageScore changed its range to match FICO’s in an effort to create consistency and to make it easier for both consumers and lenders to understand.This update was part of the broader 3.0 update. In addition to the change in range, VantageScore 3.0 adopted a new approach when considering various credit factors. It included a more nuanced breakdown of credit scores into tiers, offering a more comprehensive and detailed view of a person’s credit behavior.3 This heightened level of detail allows lenders to make more informed decisions and provides customers with a clearer understanding of the factors influencing their credit standing.

VantageScore vs FICO

While FICO scores have been the go-to for lenders, particularly mortgage lenders, VantageScore has been making strides since its introduction in 2006. As of 2024, more than 3,400 financial institutions and other companies use VantageScores, and the company has seen a 42% increase since 2023 in the number of VantageScore credit scores requested.4With a growing number of lenders, credit card issuers, and credit monitoring services turning to VantageScore, it’s increasingly important for consumers to be familiar with both their FICO and VantageScore credit scores.

Differences Between the Two Scoring Models

There are a few key differences between these scoring models, including how they weigh factors, how they consider hard inquiries, and the length of history needed to calculate a score. Let’s take a closer look.FICO and VantageScore don’t weigh credit factors identically. For example, VantageScore gives the most weight to payment history, designating it as "extremely influential" and accounting for 40% of the total score, whereas FICO gives a person’s payment history 35%.5VantageScores are also influenced by factors like total balances and debt, as well as your total available credit. FICO doesn’t take these into account.6VantageScore also has a simpler system for considering hard inquiries. FICO treats multiple inquiries made within a 14 to 45-day period for the same type of loan as one inquiry. VantageScore, on the other hand, treats all credit inquiries, regardless of the credit type, made within 14 days of each other as a single inquiry.7For example, if someone had two hard inquiries for a mortgage and a hard inquiry for a personal loan in the same week, FICO would consider these as two separate inquiries. Why? Because they are different credit types. VantageScore would count them as one hard inquiry because they all happened within 14 days of one another.

What Counts as a Good VantageScore?

Generally, a VantageScore of 650 or above is considered a good score. But keep in mind that each lender has their own credit score requirements depending on the type of credit you’re applying for. Think of your VantageScore like a test where 850 is the top grade and 300 needs improvement. Let’s look at VantageScore’s bands and what they may mean for you.8
  • 300 – 549: Time to boost your score.
  • 550 – 649: Getting better, but you still have work to do.
  • 650-699: Your score’s fair, but there’s room to grow.
  • 700 – 749: Good job, you’re doing really well!
  • 750 – 850: Excellent! You’re at the top of the class.
Once you know where your score falls, you can make a plan to maintain or improve it.

What Makes Up Your VantageScore 3.0?

The VantageScore 3.0 model breaks down the factors influencing your credit score into six key components, each of which carries a different weight in calculating your score.9
  • Payment history (40%): On time payments are the largest factor when it comes to calculating your VantageScore. In fact, one late payment could drop your score by up to 180 points!10
  • Age and Type of Credit (21%): How long you’ve had credit accounts and the types of credit you’ve had also play a role in calculating your score. Common types of credit include installment loans and credit cards. Older account ages help improve your score because they give lenders a longer-term view of how you manage money.11
  • Credit utilization (20%): Your score is impacted by how much credit you have access to and how much of it you’re using. Most experts recommend keeping your credit utilization ratio under 30%. Your credit utilization ratio is determined by dividing how much debt you have by the total amount of credit you have access to. VantageScore only considers revolving credit in calculating this ratio.12
  • Balances (11%): This component looks at your total owed balances. High balances may hurt your score even if you make on-time payments.
  • Recent credit (5%): Another component is how recently you’ve accessed new credit, such as applying for a new credit card or taking out a loan. This component looks at recent hard inquiries on your report. Try to avoid applying for credit you don’t need, as every hard inquiry stays on your credit report for two years and impacts your score.13
  • Available credit (3%): The smallest factor takes into consideration how much credit you have access to, as lenders look for people who aren’t trying to access more credit than they need. Additionally, this component considers how you’re using your credit. For example, if your utilization ratio is low but you’ve maxed out one credit card, your score may drop.14
Understanding what each of these components mean and how they impact your VantageScore may help you make choices that could boost your credit score over time.

VantageScore 3.0 Vs. 4.0

Despite the introduction of the VantageScore 4.0 model in 2017, most lenders continue to use the 3.0 model.15 The main difference between the 3.0 and 4.0 is the use of trended data in the 4.0 model.16Trended data is a type of credit reporting that includes historical information about a borrower’s behavior over time to provide a more comprehensive look at a person’s overall credit health.

How to Check Your VantageScore Credit Score

Now that you understand what a VantageScore is, you may want to check yours out. There are a few ways to check your score:
  • Visit VantageScore’s website: The website lists platforms that offer free access to your VantageScore.
  • Ask your lender: Whenever you apply for a line of credit or a loan, and the lender performs a hard credit pull, you’re entitled to see the report.
  • Check with your bank or credit card provider: Some credit card issuers or banks provide a free credit report as part of their services.
  • Use a personal finance site: Several personal finance websites offer free access to your credit scores, including your VantageScore.
If you’re interested in gaining a more comprehensive understanding of your credit history, consider visiting AnnualCreditReport.com. This website is authorized by the federal government to provide free credit reports from all three credit bureaus once each year. While your credit report doesn’t usually contain your credit score, it’s a valuable resource that helps you monitor your credit history and ensure that the reported information is accurate.

Ways to Improve Your VantageScore

If you’re unhappy with your VantageScore after checking it, you may be able to improve it over time. Here are a few steps you could take to boost your score.
  • Pay your bills on time: Consistently making payments on time is one of the most influential factors in your VantageScore. This includes payments on all of your bills, such as those for credit cards, rent, utilities, medical services, and loans.
  • Keep your credit utilization ratio low: Your credit utilization ratio refers to the amount of credit you’re using compared to your total credit limit. Keeping this ratio low (typically below 30%) shows lenders that you’re in a good financial situation and don’t rely on credit cards or loans to make ends meet.17
  • Avoid applying for unnecessary credit: Lenders perform a hard credit check anytime you apply for a new line of credit or loan. Each inquiry shows up on your credit report, allowing lenders to see how often you’ve applied for new credit. Too many hard inquiries in a short time period may send a red flag to lenders.
  • Correct errors as you find them: Be sure to review your credit report often to make sure there aren’t any errors. It’s a good way to check for signs of identity theft such as accounts you don’t recognize being reported under your name.
Keep these tips in mind and tailor them to fit your specific financial situation.

Final Thoughts

Understanding your VantageScore and how it is calculated may help you make informed decisions about your credit use and maintain a solid credit profile. Paying your bills on time, keeping your credit utilization low, and regularly checking your credit report for inaccuracies may all contribute to a higher VantageScore. Your credit score is more than just a number. It’s a reflection of your financial health and reliability as a borrower. By taking the time to understand your VantageScore and how to improve it, you may be able to access better financial opportunities. Remember that building a good credit score is a marathon, not a sprint, and the best time to start is now.
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