A vantage score is a new term that you will hear a lot in the coming months. It is a 3-digit number created by your consumer reporting agency (CRA) based on your borrowing details. Your vantage score is a numerical representation of your credit history, based on your debt-paying performance in the past. It was jointly developed by the 3 main American CRAs: Equifax, Experian, Trans Union and revealed on Tuesday, March 14 2006.
How is vantage score unique?
The exact details of how your vantage score is calculated are unknown. It has some unique features. These are as follows:
Unified scoring model: You have a single vantage score and all the 3 agencies use the same standard to calculate it. They use the same algorithm to calculate your score. Today, all 3 credit bureaus will report the same score to you unlike in the past when your score would vary from one agency to another.
Revolutionary scorecard technology: Your vantage score is measured with the help of revolutionary technology that is different from the one used by the Fair Isaac Corporation (FICO), since the 1950s.
High consistency: Your vantage score is consistent and predictive, irrespective of which agency calculates your score.
What affects your vantage score?
There are 7 factors that affect your vantage score. These are:
1.Use of available credit: The total amount you are using from your available account
2.Your payment history: The amount of money you have paid in debts so far.
3.Available credit: The total amount of credit that is accessible to you.
4.Account balances: The total debts that you owe to your lenders.
5.New credit card accounts: The new accounts that you have created recently.
6.Types of credit you owe: The different types of loans you have taken like mortgage, personal loans, credit card debt, etc.
7.Length of your credit history: Your debt history and the duration of your debts till date.
Vantage score v/s FICO score
Always remember that both your vantage score as well as your FICO score measure your bill paying ability. Some similarities and differences are listed below:
Similarities:
Both appear in your credit report, which is a record of your past credits.
Both scores need to have a high for you to be able to avail loans.
Both are calculated on the basis of information on your credit file.
Differences:
The vantage score was developed by the VantageScore Solutions, LLC, jointly owned by the 3 credit bureaus.
The vantage score is a 3year-old model to quantify your ability to pay debts and is still patent-pending. The FICO score, on the other hand, was pioneered by the Fair Isaac Corporation, a separate company that had patented the score in the 1950s.
The FICO score has dominated the credit scene for generations now, but the vantage score is seen to be a better option for many lenders and consumers.
Your FICO score has a minimum of 300 and a maximum of 850 points. Your vantage score range from 501 to 990 points. Your vantage score assigns letter grades from A to F to explain your scores.
Your FICO score takes into account 5 factors. These are:
1.Payment history
2.Outstanding debts
3.Length of your credit history
4.New credit
5.Credit mix
Your vantage score takes into account 6 factors. These are:
1.Use of available credit
2.Recently opened accounts
3.Length of your credit history
4.Credit balances
5.Payment history
6 ways to improve your vantage score
You can improve your vantage score from time to time and enhance your capacity to borrow. A higher score ensures that creditors will lend you money without worrying about loan-repayment. These simple techniques can help you improve your score:
1.Do not open multiple accounts in a short period of time.
2.Apply for credit only when you need it.
3.Make timely bill payments.
4.Pay off debts for delinquent accounts as soon as possible.
5.Try not to exceed 30% of your available credit limit with each account.
6.Maintain low outstanding balances.
After years of selling the FICO score to you, the credit bureaus have tried to introduce the vantage score. It is expected to compete with the FICO score. Fair Isaac believes that this unified vantage score is an infringement of its copyright. Nevertheless, your vantage score considers every factor that affects your credit situation and eliminates the divergences between 3 scores seen in the past.
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