If you’ve ever been denied a loan or needed to rent an apartment, chances are that your credit score came into play. Your credit score is one of the most important factors in determining your financial health and your eligibility for certain types of loans and credit cards. But what is a Vantage Score?
A Vantage Score is a credit score developed by three major credit bureaus: Experian, TransUnion, and Equifax. It is an alternative to the traditional FICO score, which is the most commonly used credit score. Vantage Scores range from 300 to 850 and are used by lenders to determine a person’s creditworthiness.
Having a good Vantage Score can be incredibly beneficial. It can help you get better interest rates on loans and make it easier to qualify for certain types of credit cards. It can even help you get better deals on insurance premiums. With that in mind, let’s take a look at how Vantage Scores are calculated, the components of a Vantage Score, and how it differs from other credit scores.
What is a Vantage and How is Calculated?
A Vantage Score is calculated using a variety of data points, including your payment history, credit utilization, total amount of debt, types of credit, and length of credit history. It is important to note that the exact formula for calculating a Vantage Score is not publicly available, so the exact weight of each of these factors is unknown.
The first step in calculating a Vantage Score is to gather the relevant information from your credit report. This includes your payment history, the types of credit you have, your total debt, and your credit utilization rate.
Once the data has been gathered, it is then used to calculate your Vantage Score. The score is then compared to a range of numbers from 300 to 850. The higher your score is, the better your creditworthiness is.
What is a Good Vantage Score
The components of a Vantage Score are the same as those used to calculate a FICO score. This includes your payment history, the types of credit you have, your total debt, and your credit utilization rate.
Your payment history is the most important factor in determining your Vantage Score. It accounts for 35% of your score. Lenders want to see that you are consistently making on-time payments, so it’s important to make sure you’re paying your bills on time.
The types of credit you have also plays a role in your Vantage Score. This accounts for 10% of your score. Lenders want to see that you have a mix of credit, such as credit cards, installment loans, and mortgage loans.
Your total amount of debt accounts for 30% of your Vantage Score. Lenders want to see that you have a manageable amount of debt and that you can make payments on time.
Finally, your credit utilization rate accounts for 25% of your Vantage Score. This is the ratio of your total credit balances to your total available credit. It’s important to maintain a low credit utilization rate, as this shows lenders that you can manage your debt responsibly.
Understanding Your Vantage Score
Once you’ve calculated your Vantage Score, it’s important to understand what it means. Your Vantage Score is made up of five categories, ranging from very poor to excellent.
A score of 300-549 is considered very poor, 550-649 is considered fair, 650-699 is considered good, 700-749 is considered very good, and 750-850 is considered excellent.
It’s important to note that different lenders have different criteria for what is considered a “good” score. Some lenders may consider a score of 650-699 to be good, while others may require a score of 700 or higher.
How is Vantage Score Different from Other Credit Scores?
Vantage Score is different from other credit scores in a few key ways. First, Vantage Score is a newer credit score, so it may not be accepted by all lenders. Second, Vantage Score takes into account more data points than other credit scores, such as rent payments and utility payments. Finally, Vantage Score may be more lenient when it comes to late payments and other negative items on your credit report.
How Can You Improve Your Vantage Score?
Improving your Vantage Score is not an overnight process, but there are a few steps you can take to improve your score. First, make sure to make all of your payments on time. Lenders want to see that you are consistently making on- time payments, so make sure to pay your bills when they are due.
Second, pay down any high-interest debt. High-interest debt can drag down your score, so it’s important to pay it off as quickly as possible.
Third, keep your credit utilization rate low. As mentioned above, your credit utilization rate accounts for 25% of your Vantage Score. Make sure to keep your balance low relative to your available credit.
Finally, don’t open too many new accounts. Too many new accounts can hurt your score, so only open new accounts when necessary.
The Benefits of Having a Good Vantage Score
Having a good Vantage Score can be incredibly beneficial. It can help you get better interest rates on loans and make it easier to qualify for certain types of credit cards. It can even help you get better deals on insurance premiums.
Having a good Vantage Score can also help you get approved for mortgages and other types of loans. It also shows potential employers and landlords that you are responsible with your finances.
The Different Types of Vantage Scores
There are three different types of Vantage Scores: VantageScore 3.0, VantageScore 4.0, and VantageScore 5.0. Each version is slightly different, so it’s important to understand the differences.
VantageScore 3.0 is the oldest version of the Vantage Score. It was developed in 2006 and is used by many lenders. VantageScore 4.0 is an updated version of the score, which was released in 2017. It takes into account more data points than VantageScore 3.0, such as rent payments and utility payments. Finally, VantageScore 5.0 is the latest version of the score, which was released in 2019.
Common Reasons Your Vantage Score May Drop
Your Vantage Score can drop for a variety of reasons. One of the most common reasons is a late payment. If you miss a payment, your score will take a hit.
Other common reasons for a drop in your Vantage Score include high credit utilization, too many new accounts, closing old accounts, and errors on your credit report.
Conclusion
Understanding what is a Vantage Score and how it is calculated can be incredibly beneficial. A good Vantage Score can help you get better interest rates, qualify for loans and credit cards, and even get better deals on insurance premiums. With that in mind, it’s important to understand the components of a Vantage Score and how it differs from other credit scores. Additionally, it’s important to take steps to improve your Vantage Score, such as making on-time payments, paying down high-interest debt, and keeping your credit utilization rate low. Finally, it’s important to be aware of the common reasons your Vantage Score may drop, such as late payments and errors on your credit report.
If you’re looking to improve your Vantage Score, the best thing you can do is start by understanding what a Vantage Score is and how it is calculated. Armed with this knowledge, you can make informed decisions about your credit that can help you get better deals on loans and credit cards.
