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VantageScore Credit Score vs. FICO Score

Sun Jan 20, 2008 10:01AM | By Tony

See more in Credit Bureaus | Permalink | Email | Comments (0)

What is VantageScore?

The VantageScore which we first wrote about in March, has been sent to consumers. It does create some confusion, but the idea is to simplify credit score system and show a potential borrower where he or she exactly stands. Developed jointly by Experian, TransUnion and Equifax, VantageScore uses both a number and a letter grade - A, B, C, D and F.

VantageScore ratings

The VantageScore credit rating is as follows:

A: 901–990 - Super prime
B: 801–900 - Prime plus
C: 701–800 - Prime
D: 601–700 - Non prime
F: 501–600 - High risk

It obviously doesn't like the word sub prime, does it? Grade A means you are in the top 11% of the population and are viewed by lenders as low risk, and likely to get the most favorable interest rates and terms for a loan.

Grade B means you have shown good credit management and are in the top 40% of the population. You can still get a loan on quite good terms, but to get the best scenario you may have to look around.

Grade C puts you in the top 60% of what is considered a creditworthy group and you can get some reasonable terms, but lenders may look deeper into your credit history and ask for additional documentation for more favorable terms.

Grade D puts you in the lowest 38% of the population which is a higher group risk. You should get credit, but the interest rates and other terms will be much less favorable to compensate for higher default rates in this group.

Grade F represents the lowest 19% of consumers and is considered to be a very risky group. You can get a traditional credit, but not from too many lenders which will require large down payments, and the interest rates will be high.

VantageScore factors

The VantageScore factors 6 items in its credit scoring system with algorithm based on Payment History, Utilization, Balances, Credit Depth, Recent Credit and Available Credit.

Payment History has the biggest input with 32%, demonstrating your repayment habits, and late payments obviously affect your VantageScore negatively. Utilization with 23% shows the amounts you owe on accounts, with the larger used percentages of available credit lines being an indicator of higher risk. Balances contribute 15% and a recent increase indicates credit risk. Credit Depth carries only 13% based on length of your credit history and the types of credit you have - long credit history with a right mix of revolving and installment loans can have a positive effect on your VantageScore. Recent Credit shows the number of recently opened accounts and credit inquiries, and counts for 10%, with recent new accounts and hard inquiries being a credit risk indicator. Available Credit pitches in 7%, showing the amount of available credit on all accounts, with low balances being an indicator of good credit management and low risk.

VantageScore vs. FICO

Compare VantageScore with FICO credit score definition and you see similarities and differences. More in VantageScore.

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