Every American knows about the significance of FICO score. It is used to make important decisions concerning your ability to rent an apartment, get a job, obtain insurance and, of course, to get approved for a credit card. However, you have probably heard about Vantage credit score. Although it is not so popular and wide spread as FICO score is, it can be used as a measure of your creditworthiness and financial responsibility as well. In our article we will tell you about Vantage score features and calculation methods.
Vantage Score, technically spelled VantageScore, was launched in March 2006. It is the first credit score developed jointly by the three major credit bureaus: Equifax, Experian and TransUnion.
The Vantage Score ranges from 501 to 990 points. The higher score is representing the lowest credit risk. Each 100-point interval translates into a letter grade, in ascending order. For example, a score of 501 to 600 corresponds to a grade of "F". People with more than 900 points will receive an "A." About 75% of all U.S. consumers qualify for a grade of "C" or higher.
The Vantage Score is calculated based on the past 24 month's activity on your credit report. The scoring formulas take into consideration the following information:
- 32% - Payment History (How timely and regularly you make your credit card payments. Regular on time payments will raise your credit score, while defaults will significantly lower it.)
- 23% - Credit Utilization (The ratio between your credit card debt and available credit. If you max out your credit limit or borrow too much, the credit utilization ratio goes up. It will make your Vantage score lower.)
- 15% - Credit Balances (Your total amount of debt. Your delinquent debt is counted more harshly than your current debt)
- 13% - Depth of Credit (It means the length of your credit history. The longer your credit history is, the more creditworthy you will be considered)
- 10% - Recent Credit (How many new accounts or credit inquiries you have. A lot of recent credit inquiries will have a negative effect on your credit score because the creditors can suggest that you have serious financial problems)
- 7% - Available Credit (How much available credit you can use)
Similar to the FICO score, the Vantage Score does not take into consideration authorized user accounts, whether they are in good standing or not.
The Vantage Score have less variation between the three reporting companies because they use the same method to calculate your credit score. However, your credit activity is not reported exactly the same at each bureau. For example, some credit companies can report your borrowing-repayments record to just to one of the bureaus. That's why there are still discrepancies between the resulting scores.
If you want to improve your Vantage credit score, start with obtaining a copy of your credit report. The accuracy of the information is very important. If there are any errors, both the Vantage Score and the FICO score will not be accurate. That's why you need to carefully review your credit reports from each credit bureau and dispute in writing any inaccurate information.
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