Vantage Credit Score: How Is It Calculated?
Consumers in the US are more used to the word FICO when it comes to Credit Scores. However, since change is inevitable for development in all walks of life, Credit Scores are no exception. The law of competition may be sometimes hard for the individual, it is best for the race, because it ensures the survival of the fittest in every department. Consequently, we have promising scores like Vantage that aims at standardization clubbed with other advantages.
When the 3 national credit bureaus Equifax, Experian, and TransUnion recently announced a joint venture to produce a new credit score for businesses and consumers called the Vantage Score – some interests were affected. The three credit bureaus have previously competed with each other in providing credit report and related products to consumers and businesses. The bureaus collected information and separately used them in their own version of the FICO model (Fair Isaac Model). But things are going to change now. Let us take you through the tracks as the battle between the new and old starts to take shape…
What Is Vantage Score – As a creditor, the foremost worry that is on their minds is repayment. No matter how much money they get and how much they credit, whenever a new person asks for credit – they look for what we call creditworthiness. This is where credit scores come into the fore. They actually measure your chances of paying it back. Its that simple. The VantageScore has been constructed after reviewing the credit histories of 15 million credit files from each credit bureau. By looking at them, the VantageScore developers statistically measured the factors that may predict default (non-payment). Like FICO score, VantageScore predicts which consumer has a higher chance of defaulting.
Understanding Vantage Score – Under the old system credit scores ranged from 350 – 850, with higher scores indicating a higher level of creditworthiness. With Vantage Score higher scores still mean more creditworthiness and a letter will be assigned. In the new score system, 901 – 990 will mean A, 801 – 900 = B, 701 – 800 = C, 601 – 700 = D and 501 – 600 = F. It has often been the case that 3 different credit scores have meant that as a consumer you are left baffled. As a result, creditors have taken advantage of your confusion and lent you at higher rates. With the new system of grades – the confusion will be over. Creditors can no longer charge you for a drop of 10 points and hand out higher interest rates than another guy with a score just shade higher. It was never about the points but being proven that you are credit-worthy. Earlier scoring models had failed to fill this gap, which was being exploited by some creditors with their own custom scores. Now a guy with 698 and another gentleman with 679 cannot be treated differently. They are both creditworthy individuals and should be respected for being able to maintain decent credit history.
How Is Vantage Different From FICO Score – The VantageScore will use the same scoring criteria for all the three national credit bureaus. As a result, across credit bureaus scores will come as being steadier and less erratic. It is no secret that FICO scores use a complex formula where they have as much as 30 variables. With VantageScore, any score differences for the same consumer will be attributed to content (read information differences) and not the scoring formula. With the VantageScore even lenders will be able to use the scores to easily separate their creditworthy clients down from the most to the least risk segments. The only logical doubt expressed against the new system deals with the accuracy of data gathered. Unfortunately, the old system suffered from the same problem. FICO scores are popular as they have acceptance and have been prevalent for many years. But the need for a more transparent and consistent scoring system has brought forward VantageScore.
Competition Is Always Good – Fair Isaac scores face the age-old battle of the old lion fighting out against the young cub. A little competition is a good thing and the accuracy of VantageScore system will be tested time and again. FICO scores do have popular support (in creditors) but if Vantage manages to predict the creditworthiness of individuals better – the battle will be won in no time. The first steps have been already taken with people with no previous credit history ((thin files) being given decent scores – something FICO scores were unable to in all these years. However, ultimately it is the Credit Report that becomes decisive no matter which score is used. So, keep checking your reports at regular intervals.