What Is VantageScore and How Is It Calculated?

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  • VantageScore is a credit scoring model developed by the three major credit bureaus: Experian, Equifax, and TransUnion. 
  • VantageScore 4.0 takes your monthly revolving credit balances from the past 24 months into account.
  • The FHFA approved VantageScore 4.0 and FICO 10T for use by Fannie Mae and Freddie Mac in October 2022.

When someone talks about their credit score, they are usually referring to their FICO score, the oldest and most widely used scoring model. However, VantageScore is, year by year, gaining on FICO.

The second-place credit scoring model, VantageScore had a user base of 2,500 lenders pulling 12.3 billion VantageScore credit scores from July 2018 to June 2019. From March 2021 to February 2022, VantageScore boasted a user base of over 3,000 lenders pulling 14.5 billion credit scores. 

The large majority of lenders still rely on FICO scores when they make lending decisions, but VantageScore is increasingly relevant. Here’s everything you need to know about VantageScore and how it works.

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What is VantageScore?

VantageScore is a credit scoring model that was designed by the three major credit reporting agencies: Equifax, TransUnion, and Experian. 

Like other credit scoring models, VantageScore is designed to measure the creditworthiness of a consumer. The higher your credit score is, the more likely you are to pay your outstanding debts. This means less risk for lenders, which leads them to lower your interest rates. 

Comparisons are often drawn between GPAs and credit scores. The first version of VantageScore, which came out in 2006, actually assigned consumers a letter grade from A through F, which corresponded to a credit score from 501-900. This was the first of four generations of VantageScore to come out.

VantageScore 2.0 came out four years later as a result of the housing bubble burst in the late 2000s and following recession. Fluctuating finances gave VantageScore a chance to update how it looks at financial profiles. It came with the same grading system as VantageScore 1.0.

If a lender is using VantageScore now, it’s most likely using VantageScore 3.0, which was released in 2014. This iteration featured a departure from previous generations in that it axed the letter-grading system in favor of a five-tiered system similar to FICO. It also adjusted its point range to 300-850, just like FICO.

The ranges break down as follows:

The credit bureaus released VantageScore 4.0 in 2017, though the credit world has yet to widely adopt this generation. More on VantageScore 4.0 later.

VantageScore vs FICO

Because VantageScore was created as a competitor to FICO, they operate similarly. Both scoring models operate on a 300-850 scale, though as we discussed earlier, this wasn’t always the case.

“Think Pepsi and Coke,” says John Ulzheimer, a credit expert and former FICO and Equifax employee. “It’s that simple.”

However, your VantageScore will likely differ from your FICO score. This is because VantageScore weighs information on your credit score differently. Here is the full breakdown:

While FICO and VantageScore weigh payment history equally, it’s worth noting that FICO weighs new credit — which considers recent hard inquiries  — twice as heavily as VantageScore.

Calculations aside, it’s worth mentioning that FICO is still, by far, the dominant credit scoring model. FICO claims that 90% of lenders use FICO scores when deciding whether to lend money to a borrower. Ulzheimer says that just because FICO is leading VantageScore in usage, that doesn’t mean that VantageScore is irrelevant. 

“Being in the second position in the credit score, space is still a really good place to be, given the massive amount of volume of credit scores that are used every single year,” Ulzheimer says.

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VantageScore 4.0

VantageScore 4.0 is the latest generation of the credit scoring model. Unlike previous models, 4.0 takes into account “trended data.” Trended credit data looks at the balances on your lines of revolving credit (credit card balances) for the past 24 months to predict future performance. “That data is enormously predictive of risk,” Ulzheimer says. 

With an additional metric to keep track of, VantageScore 4.0’s new calculation distribution changes slightly. Here’s the full spread:

In October 2022, the Federal Housing Finance Administration (FHFA) approved VantageScore 4.0 and FICO 10T for use by Freddie Mac and Fannie Mae. This means that when these credit scoring models are implemented in a few years, lenders will be required to provide FICO 10T and VantageScore 4.0 to the Enterprises. 

How to check your VantageScore

Most financial institutions, such as credit card companies or banks, will provide you with your FICO score. However, because VantageScore isn’t nearly as popular or widely used, your score might not be immediately accessible to you. 

However, there are still plenty of ways to access your VantageScore for free, which the
VantageScore website lists. For example, Credit Karma offers your VantageScore 3.0 from TransUnion and Equifax. Several places like American Express, CreditWise, and Credit Sesame also offer VantageScores.

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