This is the first of five posts relating to credit scores and credit history. Today we’ll talk about what and who uses VantageScore. If you ordered a credit score along with your Experian credit report, you probably got a VantageScore and wondered “what the heck is this?” It’s a new credit score developed by the three credit bureaus (Experian, TransUnion, and Equifax) to compete with the FICO score.
How Does the VantageScore Work?
The VantageScore is derived similarly to the FICO score, but uses a few additional scoring metrics. The score range is wider and higher, and you receive a letter grade in addition to your number.
FICO scores range from 300 to 850, while VantageScores range from 510 to 990. Each 100-point range is also assigned a letter score from A to F. Scores of 900-990 are the equivalent of an “A.”
Although both formulas are proprietary, experts say the scores are based on several factors.
The FICO score is calculated with the following factors:
- 35% payment history
- 30% outstanding balances
- 10% types of credit you hold (loans, credit cards, etc.)
- 15% credit history length
- 10% recent history
The VantageScore adds a few factors and changes the scoring model slightly:
- 32% payment history
- 23% amount of credit you’re currently using
- 15% credit balances
- 13% length and depth of credit history (kinds of credit and age of accounts)
- 10% new credit accounts and inquiries
- 7% total available credit
Who Uses VantageScores?
I couldn’t find much evidence to date that lenders are using the new scores. The score was introduced in 2006, so most lenders are still testing its use versus the FICO score. If you’re planning to apply for a mortgage, take out a car loan, or just want to know what the lenders are seeing, buy your FICO scores. You could ask your potential lenders if they use VantageScores, but I wouldn’t buy them unless they say they do.
Are the Scores the Same for All Bureaus?
Each credit bureau computes an individual VantageScore using the information they have in their files. Some of your accounts may not be reported to all the bureaus, so there could be some variation.
FICO VS VantageScores
We discovered the VantageScore when my husband checked his credit report and requested his credit score along with it. We were confused when we saw this strange number and letter grade, so we ordered his FICO score and Experian report from MyFico.com. The FICO score was 20% higher than the VantageScore, a significant difference that could impact his interest rate. If we were applying for a mortgage today, we’d want that top score used!
What Does It Mean for You?
Currently, the score means nothing for you. However, it’s possible that lenders will opt for these scores in the future. They’re cheaper than FICO scores, so smaller institutions might opt for them sooner. On the other hand, bankers don’t like change; they might opt to stick with the score they know for several more years.
It appears that you can no longer buy your FICO score from Experian. The other two bureaus still sell them rather than VantageScores. That does make me wonder how good the scores really are if the other two bureaus don’t sell them to consumers. I suggested that my husband call Experian to demand a refund, but he pointed out that they asked if he wanted to buy his “credit score,” not his “FICO score.” Technically, they didn’t lie, but I think it’s very deceptive marketing. Most people don’t know about VantageScores, and everyone knows about FICO scores. If you see the words “credit score,” you assume “FICO score.”
If you’re very curious, go buy your VantageScore from Experian, but I would wait until there’s some evidence that the score is in use. Unfortunately, that means you can only get two of your three FICO scores for the lower fees charged by the credit bureaus. FICO will only sell them bundled with a credit report for $15.95 each. Want to see your FICO score for free? Get a Washington Mutual credit card.