Posted by: John S Kiernan

VantageScore 3.0 is one of the most popular credit scores on the market, both among lenders and consumers. It’s used by more than 2,400 lenders, for example, including 20 of the top 25. And over 8 billion VantageScore 3.0 credit scores are issued per year.

As a result, VantageScore – the joint creation of the three major credit bureaus – is FICO’s top competitor. VantageScore 3.0 also happens to be the type of credit score that WalletHub will give you for free, with daily updates. So you can find out where you stand just by signing up.

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But what’s so special about VantageScore 3.0? How does it differ from version 2.0? And how does it compare to other types of credit scores? We answer all of that and more below.

Get To Know VantageScore 3.0

VantageScore 3.0 is no different than any other credit score, at least in the sense that it’s based on the contents of our credit reports and a fairly simple recipe. More specifically, here’s a breakdown of what goes into a VantageScore 3.0 credit score and how the results correspond with each creditworthiness category:  

VantageScore 3.0 Ingredients
Payment History	40%
Depth Of Credit	21%
Utilization	20%
Balances	11%
Recent Credit	5%
Available Credit	3%

VantageScore 3.0 Credit Tiers
Excellent	720-850
Good	660-719
Fair	620-659
Bad	300-619

Note: Lenders won’t necessarily use the same credit tiers as VantageScore.

 

Where VantageScore Shines:

• Stability: VantageScore relies on a sample database of anonymous credit data for 45 million people, which the company collected in two separate rounds to account for changes over time. That gives VantageScore a superior basis for comparison and prediction than models that rely on more limited data. With fewer surprises in store, you can be more confident in your credit score.

• Consistency: VantageScore uses a single model to produce scores, regardless of which bureau’s credit report provides the information. And it only considers info that’s present on at least two of the reports. Both of these practices are exceptions for the credit-score market. And the effect is positive.

  These policies help protect credit and loan applicants from receiving different decisions depending on which bureau’s report a given lender uses. The two-report rule also eliminates the possibility of a single piece of inaccurate info on just one credit report damaging your credit score.

• Predictiveness: VantageScore 3.0 outperformed its benchmarks in 99% of the tests performed by the company. That means it’s doing its job as a credit score really well. Obviously, the more accurate a credit score is, the more lenders will use it and the more you can learn from it.

Check Your Latest VantageScore for Free What’s New with VantageScore 3.0?

VantageScore 3.0 stands out relative to previous VantageScore models and other types of credit scores because it:

• Changed the Score Range – VantageScore 2.0 ranged from 501 to 990. But version 3.0 adopted the standard 300 to 850 credit score scale, making things a lot less confusing for consumers.

• Works for Millions More People – VantageScore 3.0 can generate a score for up to 35 million more people than conventional models, according to company claims. That’s because it uses more expansive credit data and improved analytics to evaluate people with:  
  • Less than 6 months of credit experience
  • No open credit card or loan accounts
  • Credit card or loan activity that is more than 24 months old
  • Credit card or loan activity only from six to 24 months ago.

• Ignores Paid Collections Accounts – Collections accounts take seven years to fall off your credit report. But if you pay the amount in question, VantageScore 3.0 will exclude the account(s) from its calculations. And that can help improve your credit score, depending on the rest of your credit history.

• Penalizes Late Payments Differently – Late mortgage payments will not hurt your credit score more than late credit card or auto loan payments.

• Protects Your Credit From Natural Disasters – If late payments and other negative records are the result of issues related to a hurricane, earthquake, tornado, etc., VantageScore 3.0 will ignore them. You just have to ask (and perhaps provide a bit of documentation).

If you‘d like to check your own VantageScore and get a personalized credit analysis, just sign up for a free WalletHub account.

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via Finance Xpress