How Your VantageScore Is Calculated
VantageScore analyzes information from your credit report from one of the three major bureaus to predict your future credit behavior. While the exact formula is proprietary, the model emphasizes several key factors, each with a different level of influence.
- Payment History (Extremely Influential): This is the most critical factor. Consistently paying bills on time has the greatest positive impact on your score. Late payments, bankruptcies, or accounts sent to collections can cause significant damage.
- Depth of Credit (Highly Influential): This considers the age of your credit accounts and the mix of credit types you have (e.g., credit cards, auto loans, mortgages). A longer history of responsible credit management generally leads to a higher score.
- Credit Utilization (Highly Influential): This measures how much of your available revolving credit you are using. High utilization—for instance, having a $9,000 balance on a $10,000 credit limit—can signal financial distress. Most experts recommend keeping your utilization below 30%.
- Recent Credit (Moderately Influential): Opening several new accounts in a short period can temporarily lower your score. This is often viewed as a potential risk by lenders.
- Total Balances (Moderately Influential): This refers to the total amount of debt you carry across all accounts.
One of the key features of VantageScore 3.0 and 4.0 is their ability to score consumers with limited credit histories, sometimes referred to as “thin files.” This makes it an inclusive model for young adults or recent immigrants who are just starting to build their credit.
VantageScore vs. FICO Score: What’s the Difference?
While both VantageScore and the FICO Score aim to predict credit risk using a 300-850 scale, they use different algorithms and weigh certain factors differently. Understanding these distinctions can help you make sense of any variations between your scores.
- Scoring Requirement: VantageScore can often generate a score for individuals with just one or two months of credit history. FICO typically requires at least one account to be open for six months or more.
- Treatment of Inquiries: Both models group multiple inquiries for the same type of loan (like a mortgage or auto loan) into a single event to avoid penalizing you for “rate shopping.” VantageScore typically uses a 14-day rolling window for this, while FICO’s window can range from 14 to 45 days depending on the model.
- Market Usage: While FICO remains the dominant score in mortgage lending, VantageScore is widely used by credit card issuers, auto lenders, and personal loan providers. It’s also the score most frequently provided by free credit monitoring services.
How to Improve Your VantageScore
Improving your VantageScore involves the same responsible habits that build any good credit score. Focus on these key areas:
- Pay All Bills on Time: Set up automatic payments or calendar reminders to ensure you never miss a due date.
- Keep Credit Card Balances Low: Aim for a credit utilization ratio below 30%. Paying your balance in full each month is the best practice.
- Avoid Opening Unnecessary Accounts: Only apply for new credit when you need it to limit the number of hard inquiries on your report.
- Keep Old Accounts Open: The length of your credit history matters. Keeping older, unused accounts open can help increase the average age of your accounts.
- Regularly Check Your Credit Reports: You are entitled to a free credit report from each of the three bureaus annually through AnnualCreditReport.com. Review them for errors and dispute any inaccuracies immediately.
Frequently Asked Questions (FAQs)
Is VantageScore a “real” credit score?
Yes. VantageScore is a legitimate and widely used credit scoring model. While some industries, like mortgage lending, may prefer FICO scores, millions of lending decisions each year are made using a VantageScore.
Does checking my own VantageScore hurt my credit?
No. Checking your own score is considered a soft credit check and does not harm your credit. Hard inquiries, which occur when a lender checks your credit after you apply for a loan or credit card, are the only type of inquiry that can temporarily lower your score.
Where can I get my free VantageScore?
Many banks, credit card issuers (like Capital One and Chase), and free financial websites (like Credit Karma) provide free access to your VantageScore, which is updated on a regular basis.
Source: Information is based on data from VantageScore Solutions and the Consumer Financial Protection Bureau.