Vantage credit score - modern credit scoring system : Bad Credit Advisor

Vantage credit score - modern credit scoring system

Developed in 2005 jointly by TransUnion, Equifax and Experian to improve risk assessment and provide consistency of scoring across these three credit reporting companies, the Vantage credit score or VantageScore is still fighting against resilient FICO scoring system, and while it has made inroads, still has ways to go. The idea behind it was to create an innovative consumer credit score model that simplified and enhanced the credit process for both, consumers and lenders, while offering greater predictiveness and consistency.

A bit of history. Each credit reporting company came up with close to 5 million anonymous consumer credit profiles to serve as the building blocks for development of the Vantage scoring system. There were two major tasks - first was to address disparities and inconsistencies in how the FICO credit system defined or characterized the data. A bank card could be defined in various ways - such as a credit card, a secured card or a retail card. For the model to perform as desired, consistent definitions had to be established for every characteristic that would eventually factor into the algorithm. Second component was to reflect the changing conditions of credit markets and recent economic trends and shifts in consumer credit behaviors. One major shift for Vantage credit score to consider, was rapid and powerful growth of consumer debt.

By the early 2005 and since 1998, mortgage debt per borrower had increased whopping 124% and total debt per borrower had doubled. Borrowers amassed more variable rate debt, maintaining higher mortgage balances, and holding a greater number of open, active bankcards. The ratio of financial obligations, mostly mortgage and consumer debt, to disposable personal income rose to a record of 18.7% earlier in 2005. Mortgage debt alone had more than doubled since 2000 to nearly $9 trillion, about $1 trillion of which were adjustable rate mortgages that contributed greatly into today's mess.

Here are few key features of Vantage credit score system,
- predicts the likelihood of future serious delinquencies, 90 days late or greater on any type of account
- returns a score range of 501-990 with higher scores representing a lower likelihood of risk
- consumer score is based on a 24-month review of a consumer’s credit file
- includes up to four score factor codes and a fifth FACTA reason code
- can be accessed from all three credit reporting companies
- does not consider Authorized-User trade lines

Vantage scoring system is based on following six primary data points,
- payment history - has the consumer consistently paid their accounts on time in accordance with the terms of their loan or credit arrangement?
- available credit - what is the total amount of credit currently available to the consumer?
- credit utilization - how much of the total credit available is currently being used?
- credit balances - what is the total of current and delinquent account balances?
- depth of credit - how long is the person’s credit history and what is the mix of credit types?
- recent credit - how many recently opened credit accounts and credit inquiries are on file?

You can buy you Vantage score from Experian for under $6.

Mon Oct 20, 2008 12:10PM by Tony | More in Credit Bureaus | Comments (0)

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