What Is Vantagescore 3.0 And How Does It Work?

VantageScore 3. 0 is one of the credit score models that was created by the three credit reporting agencies Equifax, Experian, and Transunion. It was initiated in 2013 to replace the conventional FICO score and to offer a uniform model of credit scoring across the three credit bureaus.

The Purpose and Benefits of VantageScore 3. 0

The VantageScore 3. 0 was primarily created to enhance the predictiveness and consistency of credit scores and extend credit to more consumers. Some of the main goals and benefits of this new scoring model are.

  • If each of the three major credit bureaus has its different scoring models rather than having a single integrated scoring model. This brings about more uniformity in scoring.
  • To provide finer differentiation between creditworthy consumers and, as a result, obtain higher predictive capability along with enhanced accuracy of the scores in comparison with the previous versions of the system like VantageScore 1. 0 /2. 0.
  • To provide scores to more consumers especially those who have limited or even no credit history by using other data sources. This serves to enhance the availability of credit.
  • To help lenders and creditors to be in a position to evaluate the credit risk of more customers by offering them credit scores.
  • To enable a consumer to make a comparison of his/her credit scores as obtained from various credit bureau reports.

The VantageScore 3. 0 is calculated based on credit information from three credit bureaus namely Equifax, Experian, and TransUnion.

The VantageScore 3. 0 works in a similar fashion to traditional FICO models, and shares the same fundamental approach and methodologies for scoring but has a more sophisticated algorithm and predictive capability. It ranges between 300 and 850 where the closer to 850 one is the more creditworthy the person is considered to be.

The latest VantageScore model uses six major factors or components to calculate a person's overall credit score, with each factor given a different weightage.

  1. Investment Record (most relevant) – 35% weightage
  2. Credit utilization (very important) self-assessed importance: 23%
  3. Credit balances (more important) – 15% weightage
  4. Depth of credit history – with more importance – 13% weightage
  5. Recent credit availability (most important) – 10% weightage
  6. Credit utilization/kinds of credit employed (least important) – 4% weightage

The score of each of the above categories is arrived at based on details in the credit report and then a sub-score is computed and summed to arrive at the credit score. These factors assess how the borrower has been repaying his bills or debts as well as the length of the credit history and the range of credit experiences.

VantageScore 3. 0 also employs some nontraditional data compared to previous versions, such as rental payment history and utility account data for consumers with thin files. This in turn aids in generating credit scores for a larger number of consumers. Nevertheless, the credit score assigned to routine users of credit does not differ significantly from FICO scoring models.

The final VantageScore achieved can be interpreted by lenders as

  • 750 to 850 = Excellent Credit Score
  • 500-599 = Good
  • 650-699 = Good
  • 550-649 = Fair
  • 300-549 = Very Poor

VantageScore 3. 0 has been adopted by the three major credit bureaus and various lenders across the United States and other countries to help them manage their lending risk.

VantageScore 3. 0 credit scores are widely used by different lenders and creditors to assess the creditworthiness of consumers before extending credit card applications or loan applications. Today, VantageScore is recognized by many of the world’s leading banking and financial organizations along with standard FICO scores to make better credit decisions through a more comprehensive and versatile route. These are 5 of the ten biggest banks in America including Chase, Bank of America, Wells Fargo, and U.S Bank.

VantageScore is also used in other credit evaluation cases such as

  • Applying for a credit card or a loan
  • Customer account review for existing clients
  • Prescreening may involve the extension of credit offers to credit cards or loans.
  • Providing access to rental or phone connections
  • Assessment by government departments

To build a healthy credit history, consumers should have both the highest possible VantageScore and a good FICO score. Higher VantageScore means higher chances for approval and less expensive credit in most cases. This means that the best way to have an excellent VantageScore is to check one’s latest credit score often and ensure positive credit standing.

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