VantageScore

VantageScore is a model that is developed jointly by the top three Credit Bureaus, namely - Equifax, Experian, and TransUnion. The model is maintained and managed by VantageScore Solutions, LLC, an independent company formed in 2006 as an alternative to the FICO score.

VantageScore claims to employ machine learning technologies for generating a clearer and more accurate image of a customer’s credit. VantageScore 4.0 is the first customer credit-scoring product to incorporate advanced machine learning and trended credit data.

The model provides lenders with higher confidence to extend loans, while expanding the mainstream lending. Besides, the model is quite easy to implement and manage, and is commonly used by landlords and lenders.

Initially, VantageScore used to be on a different scale compared to FICO. However, in the recent revisions of the model, a scale of 300 to 850 has been added, similar to FICO’s.

VantageScore has gained huge popularity among lenders, and most importantly, it is offered to consumers on a large scale for free. According to Oliver Wyman’s study, during the period between July 2018 till June 2019, around 12 billion VantageScores were used among lenders.

A Brief Insight into VantageScore

The latest version of the model, VantageScore 4, is a Credit Score that’s calculated using an average of 5 key factors or components, including -

• Total credit usage, available credit, and balance (Extremely Influential)
• Credit mix and experience (Highly Influential)
• Payment history (Moderately Influential)
• New accounts opened (Less Influential)
• Age of credit history (Less Influential)

The new version of VantageScore 4 employs advanced ML techniques and algorithms, which it claims to provide more accurate results compared to a FICO score. Various other possible factors are often ignored, including nationality, race, religion, color, gender, age, marital status, occupation, salary, employment history, employer, place of residence, and total assets one possesses.

It’s true that FICO scores have remained one of the most commonly used credit scores and are employed by around 90% of the lenders. However, based on Wyman’s studies, VantageScore started increasing in popularity and has been growing annually by 20% since June 2015.

The most prolific users of VantageScore include credit card issuers and banks.

How Does VantageScore Work?

VantageScore, just like the FICO score, can run on stored data and information in the consumer’s credit files, which are managed and managed by the three national credit bureaus. To predict whether a consumer will Default on a particular loan, one can conduct a statistical analysis using the models and the available credit data.

Again similar to FICO scores, VantageScores represent the risk of loan defaults statistically in the form of three-digit scores. It is to be noted that the higher your VantageScore score is, the lower will be your credit risk.

For instance, a person having a VantageScore of 600 or less will be considered to carry a Poor to Very Poor credit. A person having a rating between 601 to 660, is said to have an Average or Fair credit. VantageScores between 661 and 780 will be called a Good Credit score. And anything above 780 is rated as Excellent.

Moreover, a VantageScore synthesizes all the information from the three credit bureaus and is made the same for each of them. However, a FICO score uses the information only from one credit bureau, and hence, works particularly on that single bureau.