What lenders use vantagescore

What Does My Credit Score Mean?

Your credit score is a three-digit number that sums up all the information on your credit report into one tidy number. It follows you around for your entire life, its value moving up and down depending on what’s happening in your financial life.В

This three-digit score goes by two different names, FICO or VantageScore. The FICO score is named after the company who invented this three-digit scoring system in the mid-1980s, Fair Isaac, Inc. Many lenders use the FICO scoring system.

More recently, the three major credit reporting agencies created their own scoring system, called the VantageScore, designed to produce a more consistent score across all three credit reporting agencies. (Each credit reporting agency collects different financial information on you, and therefore, reports a different credit score.)

So what does a score mean? What’s a good credit score? Or a bad one?

With a VantageScore, you can determine what kind of rate and terms you’d qualify for. The VantageScore range is 501–990, along with an assigned letter grade.

A: 901–990 (Super Prime; lenders offer their best rates and terms)В

B: 801–900 (Prime Plus; lenders offer good rates and terms)В

C: 701–800 (Prime; lenders offer reasonable rates and terms)В

D: 601–700 (Non-Prime; lenders offer less favorable rates and terms)В

F: 501–600 (High Risk; lenders usually do not offer credit)В

With a FICO Score, what kind of rates and terms you’d qualify for is not really defined. The FICO score range is 300–850. While there is no clear indication of what a good or bad score is, you can generally consider a score of 640–680 the dividing point between good and bad scores—the point at which above you’d get better rates and terms; the point at which below you’d get worse rates and terms.

The VantageScore Compared to the FICO Score

So what are the similarities and differences between the two scores? Because the VantageScore and FICO Score use different scoring systems, a VantageScore of say, 650 (considered “non-prime”) does not equal a FICO Score of 650 (where some lenders might consider that a “prime” score).В

If you want to assess whether or not you’d qualify for a loan before you actually apply for it, you’ll want to assess your credit by the same credit score your lender will use. Just ask your lender if it uses VantageScore or FICO.

Both VantageScore and FICO appear to place high importance on:

  • Payment history: whether or not bills are paid on time.
  • New credit inquiries: how often you request new credit for, say, a credit card, a mortgage loan, or an auto loan.В

Vantage Score appears to emphasize:

  • Credit utilization: how much of your available credit you use.

FICO appears to emphasize:

  • Length of credit history: the number of years you’ve been using credit.
  • Types of credit you use: credit card, mortgage loan, auto loan, for example.

What Types of Loans Are Vantage Credit Scores Used For?

Auto dealerships are likely to use VantageScore over FICO.

The Vantage scoring originated in 2006. This lesser-known scoring system was created to offer creditors an alternative way to view your credit risk and history versus the traditional FICO or Fair Isaac Cooperation score. Vantage scores are not calculated the same as FICO and have a range of 501 to 990, rather than the 350-850 known for FICO.

Vantage scores are used by a variety of lenders -- including credit card companies, banks and mortgage lenders. Vantage scores are often used by “subprime” lenders, or those who offer lending to those with less-than-perfect credit. The model behind the Vantage score was created specifically to score consumers more accurately -- especially those with little to no credit history. Vantage scores are not only used by lenders, they are also used by insurance carriers to determine if a policyholder is too high-risk.

VantageScore utilizes a five-tier system that assigns a letter grade to a specific score range. The better the letter grade, the less your risk. Scores that fall between 900 and 990 are assigned an “A”, 800 to 899 a “B”, 700 to 799 a “C”, 600-699 a “D” and scores under 599 assigned an “F.”

VantageScore builds its grading system and score mostly on 24-months of your credit report. Therefore, if you showcase two years of positive payment history, low credit card balances and a healthy mixture of credit accounts -- such as a mortgage and credit cards -- your score may be more favorable. VantageScore determines your final grade based on 28 percent of your payment history, 23 percent of your balance in comparison to your credit limit, 9 percent on your total balances due, 9 percent on your credit history and length, 30 percent on recently opened credit accounts and one percent on the total amount of credit you can access.

Improving Credit and Considerations

Those with poor FICO credit scores may be turned away from lenders. Vantage scores, on the other hand, show if you are working to improve your score. This is because Vantage weighs a heavy portion of its scoring on your payment history. Therefore, if you pay your debts off, make payments to other obligations on time and take care of liens and judgments, Vantage offers you a higher score than the traditional FICO system would. This is one reason auto dealerships, especially those who lease and sell to low-scoring consumers, utilize Vantage scores.

Shailynn Krow began writing professionally in 2002. She has contributed articles on food, weddings, travel, human resources/management and parenting to numerous online and offline publications. Krow holds a Bachelor of Science in psychology from the University of California, Los Angeles and an Associate of Science in pastry arts from the International Culinary Institute of America.

what lenders use vantagescore

What lenders use vantagescore

In the era of Big Data, so-called alternative data holds a special promise — to shine a new light on consumer behavior. When it comes to credit scoring, alternative data means data not being used today for risk assessment, and specifically data not found in the credit bureaus. Lenders hope scoring this data could allow them to make faster, better decisions on people who don’t have FICO® Scores — the “unscorables” with sparse or no credit bureau data on file.

Hoping to jump on the alt-data bandwagon, the three main US credit reporting agencies – through their VantageScore business – have been claiming that their score uses alternative data to score more consumers than the industry-leading FICO® Score. It sounds good, but is it true?

Claim: VantageScore leverages alternative data to score millions more consumers than FICO Scores.

Truth: The “alternative” data VantageScore uses is utilities and cell phone bills — as reported to the credit bureaus. The same data is also used by the FICO Score. Moreover, the vast majority of utility and cell phone bill data is NOT reported to the credit bureaus, and so is NOT used by VantageScore.

The fact is that VantageScore, like the FICO Score, doesn’t analyze any data that isn’t at the credit bureaus. By definition, that means it doesn’t score any alternative data whatsoever.

Nor is scoring utility payments and cell phone payments new. The FICO Score has been doing it since day one, in 1989.

What makes this claim even more misleading is that non-loan payments such as utility payments and cell phone bills CAN help score more people. That’s because the vast majority of this data is not reported to the credit bureaus. Only a tiny portion of it is included in the credit bureau data.

How sparsely reported is this information? An estimated 92% of US adults have a cell phone — think about it, everyone you know does. However, just 2.5% (or roughly 7 million) of all consumer credit bureau files contain telco account information.

The story is similar on the utility account side, where over 60% of American adults pay for utilities, but just 2.4% of consumer credit bureau files contain utility (non-telco) payment information. Judging by credit bureau data alone — the data VantageScore accesses — you would think most Americans don’t have water or electricity in their homes.

What lenders use vantagescore

As for the notion that using this data can score more people, here’s another fact: Of the unscorable population that have sparse data at the credit bureaus, less than 2% have any telco or utility data.

So where is Americans’ data on utility and phone payments? And how can we score it?

This data is reported to other databases, which contain payment information on more than 200 million unique consumers. This data is used by FICO® Score XD, FICO’s next-generation credit score meant to increase the scorable universe through the use of (truly) alternative data.