What is VantageScore? All About the Credit Scoring Model and How it Compares to FICO

Have any of you ever tried figuring credit scores out? Well, sit tight as I get ready to wade into the world of VantageScore — the credit score system that is less known than FICO but can still pack a punch.

VantageScore is another way for you to take a peek at how your credit is shaping up. Like FICO, it’s used by lenders to see if you’re good for borrowing money. However, it calculates things a little differently.

VantageScore is a credit scoring model developed by the major credit bureaus to provide lenders an alternative to FICO scores for assessing creditworthiness.

In a nutshell, VantageScore is a credit score model running between 300 and 850, and the higher scores represent better credit health. It was developed to be a competitor to the more common FICO score — an alternate method by which lenders can take your creditworthiness into account.

I’m going to lift the lid on the VantageScore engine and show you how it works, how it differs from FICO, and what you can do to improve your scores.

Your VantageScore helps lenders decide whether you’re worth lending money to. It checks out how good you are at paying your bills and how deep you’re digging into your credit.

Taking all of that into consideration, it gives everyone a full picture of whether your credit’s as solid as concrete or shakier than an old wood fence!

Purpose of VantageScore

VantageScore came into town fresh-faced, trying to make its mark long after FICO had set up shop. It arrived in 2006 courtesy of the three big credit bureaus: Equifax, Experian, and TransUnion.

These agencies felt it was about time people had another way of determining how their credit was faring, so they hitched their wagons together and created VantageScore.

VantageScore is gaining ground as an alternative credit score model to the more widely used FICO score.

It was supposed to be an alternative for the public, but it had a steep hill to climb as FICO was already running the show.

It is not the household name FICO is, but it’s gaining a reputation. Lenders are starting to give it a second look, but it doesn’t command quite the same spotlight as its older, more famous cousin, FICO. Think of it as the young buck trying to make its name, still working its way up through the minors.

How it Compares to FICO Scores

VantageScore operates on a somewhat different set of gears and levers than FICO, so I’ll walk you through the details in just a minute. But first, here’s a little taste of how they differ from each other:

• Medical Debt: VantageScore is much more lenient regarding medical debt than FICO. If your medical debt is less than six months old, VantageScore won’t consider it at all in formulating your score. This gives you several months to wrangle with insurance and straighten out any hiccups without your credit score taking a hit. FICO, on the other hand, will count that debt as soon as it pops up but will ignore it if you’ve paid it.
• Trended Data: VantageScore pays attention to your credit habits over time, such as if you are paying off balances or just making the minimums. That is different from older FICO versions, which tend to look at your credit like it’s just one frozen moment. But FICO 10 T does check out the trends too, though most folks still use FICO 8 or 9.
• Non-Traditional Data: VantageScore factors in utility bills and rent payments if they are reported and gives you a little extra credit for paying those on time. FICO has mostly kept just to credit cards and loans. However, newer versions like FICO 9 and 10 have started incorporating rent and utility payments into the mix.
• Hard Inquiry Impact: VantageScore groups together multiple hard inquiries from mortgages, car loans, or student loans that take place within 14 days, so they count as one. FICO does the same trick but uses a window that varies depending on which version is being employed, anywhere from 14 to 45 days.
• Personal Loans: FICO 10 tightens the reins on personal loans, especially those used to consolidate credit card debt. If you were to do that and then build up more credit card debt, your FICO 10 score would drop faster than you can say, “bad credit.” No older versions of FICO were ever this harsh.

Depending on whether a lender is using VantageScore or FICO, the same financial moves may yield a different outcome.

Knowing what the VantageScore range is set up as is important, as that lets you understand where you stand within the credit world. It’s also worth knowing how the VantageScore ranges compare to FICO’s.

VantageScore recognizes excellent credit at 781 and above, while FICO recognizes exceptional credit at 800 and above.

If your score is high, then you are less of a risk to lenders, which enables better deals on loans and credit. But if it gets down in that low range, then you’re going to have a much tougher time borrowing money without paying through the nose!

VantageScore Scoring Categories

VantageScore scores run from 300 all the way up to 850, just like FICO’s. But while the endpoints are the same, VantageScore splits up the range a bit differently based on how likely you are to get approved for credit.

Here’s how it breaks down:

• Very Poor (300-499): Sit in this range, and you may be in for a rough ride trying to get approved for any kind of unsecured credit. Lenders will consider you to be a risk, most of them saying, “No thanks!”
• Poor 500-600: Within this score range, you have a fair chance of getting approved, but do not expect sweet deals. The lenders may throw you a line, but the terms will likely be tougher than week-old biscuits, with high interest rates and low credit limits.
• Fair (601-660): Things are looking better for you now. You’ll most likely get approved, but the terms are still not terrific. You won’t get the worst deal, but you’re not going to be celebrating with the best rates, either. Think of it as riding in an old pickup versus a shiny new truck.
• Good (661-780): Now we’re talking! You’ll appear to lenders like some kind of big shot with a score within this range. You will really reel in some great rates and terms, ones that will make borrowing a lot easier.
• Excellent (781-850): If your score’s in this range, you’re sitting on a rainbow. Lenders will be in a frenzy, falling over themselves to give you the best rates and products. You’ll qualify for just about anything, and your credit options will be as wide open as the prairie.

In practice, these score categories aren’t too different from FICO’s, meaning your score across both systems should fall fairly close. But just a note: they don’t always exactly line up.

FICO Scoring Categories

FICO scores also range from 300 to 850, with higher numbers showing you’re less of a risk to lenders. Not sure how to size it up?

Here’s the breakdown:

• Poor: (300-579): You will hardly get approved for any unsecured credit, and if you do, then get ready for sky-high interest rates.
• Fair (580-669): You will not get the best deal, but you do have a good opportunity to get virtually all types of credit approved.
• Good (670-739): Considered low-risk to most lenders, you’ll likely qualify for more favorable or better interest rates and terms.
• Very Good (740-799): You have a pretty good chance of getting the best available credit terms.
• Exceptional (800-850): You’ve got the world by a string, qualifying for the very best credit offers out there.

The U.S. average credit score tends to fall between 715 and 725, right in the middle of that “Good” range. If you are just getting started with credit, however, your starting FICO score will be a little lower.

Factors That Impact Your VantageScore

Now, here’s the scoop on what factors influence your VantageScore. They are similar to FICO’s, but the math is a little different. These factors are for the VantageScore 3.0, which is still commonly used by personal finance websites and financial institutions.

• Payment History (40% of total score): Regarding VantageScore, paying your bills on time is king. It plays a more significant role here than with FICO, which means an excellent payment history will give your score a big boost. On the reverse side, missed or late payments will drop your score way faster than in FICO.
• Credit Depth (21%): Credit Depth looks at how long you’ve used credit and what kinds of credit accounts you have. VantageScore gives a bit less weight to this, at 21% than the FICO mixture of Length of Credit History and Credit Mix at 25%. The longer and more varied your credit history, the better off you’ll be. If your history is shallow, your score will suffer.
• Credit Utilization (20%): Credit Utilization gets a category all to itself in VantageScore. It is the ratio of your credit card balances to your credit limits. If possible, you want this number below 30%. The lower, the better, because if you are relying on credit too much, it is a good indication that you are a bit too dependent upon it.
• Balances (11%): Balances in VantageScore look at the total amount you owe on all your accounts. It is like FICO’s Amounts Owed category but doesn’t consider the utilization. High balances will pull your score down, even if your credit utilization looks decent.
• Recent Credit (5%): This one’s about how many new accounts you’ve opened lately. It resembles FICO’s New Credit factor. VantageScore doesn’t take kindly to you opening multiple accounts in a short time. That said, VantageScore doesn’t give this as much weight as FICO does.
• Available Credit (3%): All right, well, here’s where it gets interesting: VantageScore has something that FICO doesn’t. It considers the total amount of credit available to you, regardless of how much you’re using. It’s not much, but having more credit can give your score a tiny bump.

Want an old-fashioned credit score boost? Here are some pointers that will help you move up the ladder. Pay on time, keep debt low, and don’t go crazy applying for new credit accounts.

These are the tickets to good credit. Adopt them, and your score will be off and running, opening the doors to mountains of financial options.

1. Pay Your Bills on Time

One of the most effective ways to get your credit score on the right path is to pay all your bills on time, every time.

You can set reminders and mark your calendar. The best idea is to use apps to set up automatic bill payments.

Take advantage of automatic payments, and you will not have to worry about forgetting a payment date. That keeps your payment history clean as a whistle.

Since payment history is one of the biggest factors in your credit score, it’s worth protecting.

2. Reduce Your Credit Utilization

Another surefire way to nudge your score up is by knocking down those credit card balances.

You may want to adopt the Avalanche Method to pay off high-interest debts first and stop them from sucking your wallet dry.

Or consider the Snowball Method to attack your smallest debts first — it’s a way to rack up some quick victories.

Look at simplifying things a bit. Debt consolidation options let you combine all of your debt into one account in the form of a balance transfer credit card or a personal loan.

These will lower your interest rates and give you an easier time paying it back. 

3. Avoid Frequent Credit Applications

If you’re thinking about applying for several new credit lines all at once, pump the brakes!

Lenders can get mighty suspicious when they see too many hard inquiries popping up on your report in a short time.

All those inquiries can drag your score down, so don’t apply for every offer that comes your way.

Instead, apply for new credit when you have a good reason and a purpose all lined up.

Just as a good doctor can figure out what’s ailing you, VantageScore can reveal your credit health to see what kind of shape you’re in.

Aim for a high score, and the world will be your oyster. If your credit is down in the dumps, fix your spending habits and get that score back into a respectable region. I just know that you can do it!