VantageScore is a consumer credit-scoring model, created through a joint venture of the three major credit bureaus (Equifax, Experian, and TransUnion). The model is managed and maintained by an independent company, VantageScore Solutions, LLC, that was formed in 2006 and is jointly owned by the three bureaus.[1]
VantageScore models compete with the credit scoring models produced by Fair Isaac Corp. FICO.[2][3] Like the models developed by FICO, VantageScore models operate on data stored in the consumer credit files maintained by the three national credit bureaus. VantageScore models and FICO models use statistical analysis on those data to predict the likelihood a consumer will default on a loan. VantageScore and FICO models represent risk of loan default in the form of three-digit scores, with higher scores indicating lower risk. VantageScore and FICO use different, proprietary analytical methods, and scores from one system cannot be translated into one from the other.
VantageScore and FICO are developers of competing credit scoring models. FICO, the original creator of the FICO Score, was not involved with the creation of VantageScore's formula.[4]
VantageScore, FICO and the credit bureaus have allowed the public to know some information about the credit score categories and the corresponding calculation weights. FICO allows consumers to get their generic or classic FICO score for Experian, TransUnion, and Equifax through the myFICO website. Consumers can get their VantageScores from free credit report websites, and TransUnion and Experian offer VantageScores to consumers for a fee through their websites.[5]
In contrast with FICO's credit scoring models, which are custom-built for each of the three national credit bureaus, to accommodate structural differences in the bureaus' databases, VantageScore model design allows a single model to operate on all three bureaus' data.[6] VantageScore Solutions holds several patents on processes that ensure pieces of data within each bureau's consumer database will be treated identically, regardless of differences in database structure.[7][8][9][10] These methods eliminate much, but not all, discrepancy in VantageScore scores obtained at the same time from different credit bureaus. Some variation is unavoidable because factors such as the timing of lenders' payment-information reports can mean the contents of a given consumer's credit file will differ somewhat at each of the three credit bureaus.[11]
The first two VantageScore models (VantageScore 1.0, issued in 2006, and VantageScore 2.0, released in 2010) used a scale range of 501 to 990, and assigned letter grades to various bands within that range, according to TransUnion:
A: 900–990 B: 800–899 C: 700–799 D: 600–699 F: 501–599VantageScore 3.0, the version of the model released in 2013, adopted a scale of 300 to 850.[12] VantageScore attributed the change, which matches the scale range used by FICO models, to the fact that consumers were more familiar with it than with the original VantageScore range, and because a 300-850 scale would make it easier for lenders to incorporate the VantageScore into automated systems.[13]
VantageScore 4.0 was released in mid-2017, and contains many updates from 3.0.[14] For example, version 4.0 weights medical accounts reported "in collection" less heavily than non-medical collection accounts. Paid collection accounts of any type are not factored into the score; this is a major difference from FICO, since most versions of FICO count any collection account into the score, paid or unpaid. VantageScore 4.0 also looks at trended data provided by the credit bureau from which the score is calculated, and examines a consumer's credit utilization rates over time. This is a major development in credit scores since other models to date (including older versions of VantageScore and all existing versions of FICO) only examine the most recently reported billing cycle. So, for example, if a consumer's credit card often reports at or near the credit limit, but the consumer paid his/her balance recently and it now reflects a $0 balance, most credit scores would look only at the current $0 balance when calculating utilization rates. However, the makers of VantageScore 4.0 believe it is more accurate to look at the consumer's utilization rates over a period of time. This may help or hurt a consumer, depending on their situation. A consumer who has historically used very little of their credit but makes a large one-time purchase and shows a high balance at the time the score is calculated would score better under VantageScore 4.0 than, say, FICO 8, which looks only at the most current billing cycle information.