VantageScore 3.0 Impacts Both Lenders and Borrowers

VantageScore 3.0 Impacts Both Lenders and Borrowers
  • Opening Intro -

    For years the most influential credit score ratings have come from three major companies: Experian, TransUnion and Equifax.

    They have been the main sources for lenders, when deciding who to lend money to and the terms in which the loans will be given.


Every person who has ever needed to borrow money has learned the importance of having a good credit score. Good scores help individuals achieve homeownership, purchase cars and take part in many of life’s pleasures. While the three major scoring companies are still on top, a new scoring method is currently in place that has been making an impact on both lenders and borrowers…it’s called VantageScore 3.0.

The VantageScore is still not as well known, but should be an important consideration when checking how well you are managing credit. This is a newer scoring model that provides scoring for some 30-35 million previously unrated consumers. The score is based primarily on a 24-month review of your credit reports and aligns with FICO scores of 300 to 850 with corresponding grade values of A, B, C, D and F.

What makes the VantageScore different from traditional credit reports is the ability to create a score for those with little credit activity (18-25% of the adult population has no credit history.) VantageScore uses data not included in traditional scoring algorithms such as collection accounts, rent, utilities, public records and cell phone services. Trade lines found in traditional credit files, along with older activity generally excluded from mainline scores, are also collected to generate a score that will benefit infrequent credit users.

One benefit of accessing a VantageScore rating is that it provides a more precise timetable of your activity. For example, if a loan default is caused by an unexpected event, such as a sudden loss of income or a natural disaster, a lender will be able to see the cause and effect and determine that you would still be a good risk. Lenders who review your VantageScore report will be able to connect the dots and perhaps be more forgiving once they know the circumstances. With more details and clearer timeframes about negative behaviors, potential lenders will have a better representation of how you manage your finances, helping you to qualify for more competitive credit rates.

The VantageScore model was developed in 2006 in collaboration with the three major credit-reporting agencies with their main goal, to help lenders better access consumer risk. The model differentiates between types of loans; for example, installment loans will be recognized apart from college loans and first mortgages from a refinance.

The scores are calculated based on six factors of varying degrees with approximate percentages given below: 

  • Payment history (32%)
  • Utilization of available credit (23%)
  • Total credit balances (15%)
  • Length of credit history and types of credit (15%)
  • Recently opened credit accounts (10%)
  • Available credit (7%)

According to the VantageScore website, they are currently being used by seven of the top 10 financial institutions, six of the top 10 credit card issuers and four of the leading auto lenders and mortgage lenders. “Today’s competitive lending environment dictates that lenders need access to as many creditworthy consumers as possible within their target universe, demanding the highest level of predictive performance from the credit scoring model they use,” said to Barrett Burns, president and CEO of VantageScore Solutions.

Interpreting Your Vantage Score

Originally the scores generated were between 501 and 990. Recently, the 3.0 model has changed to align with those produced by the FICO algorithms from 300 to 850. As with the other scoring models, a higher VantageScore indicates less credit risk for lenders. Conversely, a low score will make credit harder to come by with lenders less inclined to take the risk.

The negative factors that your VantageScore focuses on include having credit card balances that are too high, a large percentage of available credit in use and too little paid on mortgage or real estate accounts. Paying them down may help to improve your score.

No matter which type of credit score you examine to check the health of your credit, keep in mind that a variety of organizations other than lending institutions will use the information to your benefit or determent. Insurance companies will request scores to calculate premiums for home, life and other insurance policies. Potential employers and landlords consider your scores to determine whether to hire or enter into an agreement. Keep your score high and enjoy lower rates and better terms that will make life a little easier and less costly.

Noreen Ruth is a staff writer for and other financial websites. She stays current on the latest legislative actions that may affect a consumer’s ability to get approved for low interest credit cards, manage finances, understand and utilize debt services, save money along with other relevant financial topics. Striving to educate consumers, she uses government and other reputable sources to provide up-to-date, relevant news.


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