As an alternative to the Fair Isaac Corporation’s (FICO) score, which was founded in 1989, the three main credit bureaus (Equifax, Experian, and TransUnion) released VantageScore in 2006 to consumers. Nowadays, many people utilize it, much as FICO scores.
The most recent update to VantageScore is version 4. There are six elements that go into its calculation, and each one is given a weight:Payment history (41%),Age/mix of credit (20%),Credit utilization (20%), new credit (11%),Credit balance (6%),Available credit (2%)
The top three VantageScore components are the most essential, accounting for 81%. Credit bill payment history shows how frequently a person pays on time. Age and variety of credit relate to how long they’ve had credit accounts and if they’ve utilized credit cards and vehicle loans (older accounts and several account types are good). Credit utilization measures a person’s current credit use (the lower the proportion, the better).
VantageScore uses data from all three credit bureaus, private entities that provide credit reports to lenders. Credit reports include a person’s current and previous credit accounts, including mortgages, auto loans, and credit cards, for up to seven years. They don’t include income, assets, marital status, race, or ethnicity.
Credit bureaus get data from creditors and court documents. Some creditors don’t report to all three agencies, thus a person’s credit report may vary. VantageScore calls itself “the first and only tri-bureau credit scoring model” and benefits from access to all three agencies’ information.
VantageScore emphasizes “machine learning” and trended data. “Trended credit data,” says it, “reflects changes in credit behaviors over time, in contrast to the static, individual credit history records that have long been available in consumer credit files and used in generic scoring models.” It claims these methods enable it to issue credit ratings to more individuals, particularly those with limited credit histories.
Reference
Kagan, J. (2023, June 14). VantageScore: Meaning, Model, Components. Investopedia. https://www.investopedia.com/terms/v/vantagescore.asp