A Simple Guide To VantageScore Credit Rating

A Simple Guide To VantageScore Credit Rating

The FICO score created by Fair Isaac Corporation in 1956 has been the standard credit rating system for many companies, financial and non-financial institutions, government agencies and individual, etc. for many years.

However, the three major credit bureaus (Experian, Equifax and TransUnion) created an option to FICO score in 2006. This alternative is known as VantageScore and it’s also a consumer credit rating service.

VantageScore’s rating scale is not the same as FICO. VantageScore is calculated using a weighted average of several different factors and they include the following:

  • Recent credit
  • Credit balances
  • Credit utilization
  • Depth of credit
  • Payment history
  • Consumer’s available credit  

Similar to FICO score, VantageScore emphasizes more on payment history and credit utilization.

Read more about the five significant factors that affect credit scores here.

Find out why credit score crashes and how to improve it here.

New to credit scores? Read this beginners guide to figure out what credit scores are all about.

FICO calculates its scores using information from each of the major credit bureaus distinctly. But VantageScore calculates its score using a combination of data from all three major credit bureaus.  

VantageScore puts forward an alphabetical score within the letter A to F as an alternative to using numbers to depict score ranges.

Nonetheless, many financial institutions including banks and lenders still use the FICO score because it is the most popular and have been widely used for long since 1956.

Read more: 

Find out how to repair your credit score with a DIY approach here.

Read and learn more about what you’ll get with a credit repair service here.

This is how to stop unauthorized people from requesting for your credit report here.

Understanding The VantageScore Process

VantageScore and FICO rely on data that are kept in an individual’s credit files handled by TransUnion, Experian and Equifax.

Both companies then analyze the provided information to find out the possibility that a potential borrower will fail to pay back a loan or is creditworthy.

As such the two credit rating methods FICO and VantageScore indicates the risk of a consumer’s creditworthiness, and they are presented in three-digit scores. Consumers with excellent or higher scores are rated as highly credit worthy and less likely to default on a loan.  

VantageScore Rating System

VantageScore ranges from 501 to 990. On the other hand, FICO scores range from 300 to 850. Consumers with a VantageScore that is below 630 are said to have poor credit.

Under the VantageScore rating method, credit scores that ranges from 630 to 690 are rated as average or fair credit rating.

Scores that are within the ranges of 690 to 720 are rated as good credit score and scores that are above 720 are rated as excellent score.

The factors that makes up a VantageScore reflects uses of available credit, payment history, recent credit, depth of credit, as well as balances.

The payment history indicates a consumer’s extent of making timely bill payments. The depth of credit indicates how old an individual’s credit history is as well as the types of accounts they have opened.

Also, balances reflects total unpaid loans. While recent credit indicates the number of hard inquiries that were made into an individual’s account.

Credit utilization and available credit reflect the amount of total revolving credit an individual uses.

For instance, if an individual has a $20,000 line of credit in a certain month and the individual has drawn $10,000 from that line, such a consumer is left with a 50% credit utilization.

Need a free credit card? Find out how to get one here.

Find out how to apply for a credit card here.

Learn how to make the most of your first credit card here.

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