Revamped VantageScore - What do you need to know about it?

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Ever since Fair Isaac Corporation (FICO) lost the lawsuit to VantageScore in 2010, the new kid on the block has been gaining popularity amongst consumers.

VantageScore - FICO is losing its place to the new kid on the block

FICO filed a lawsuit against VantageScore to stop them from using their trademark 300-850 credit score range. Fortunately or unfortunately, FICO lost the court battle to VantageScore, who is giving a tough competition to them since 2007.

VantageScore - A tough competitor from 2007

FICO has become synonymous with the term ‘creditworthiness’. Today, almost 10 billion FICO scores are sold to financial institutions for deciding if a line of credit should be given to a potential customer.

VantageScore is the child of 3 main credit bureaus in the nation - The TransUnion, Experian and Equifax. As per VantageScore Solutions, LLC, nearly 6 billion VantageScores were sold in the nation. This figure is double the number of VantageScore used in 2014 and six times the number in 2012.

Six billion VantageScore were used by lenders, and that speaks a lot about VantageScore’s growing popularity. It’s a huge achievement.

As per the statistics, VantageScore is used by 7 of the top 10 biggest financial institutions in the country. It is used by 2000 lenders in the country. But still, we will consider VantageScore as a new kid on the block since FICO is used by 90 of the top 100 financial institutions. Besides, there is another factor to consider. It’s yet unknown how many of these 6 billion scores were used by lenders for determining the creditworthiness of potential consumers. It’s still uncertain about how many consumers got these scores from free credit-monitoring services such as Quizzie or CreditKarma.

FICO is clear about their statistics and performance. They are very sure that 10 billion scores were used by lenders to make their final lending decisions. So, they’re still at the top.

Strategies to win battle

VantageScore 3 omits collection accounts with zero balances and gives less penalty to people with delinquent medical debts. This was a tough challenge for FICO. But, they accepted and answered this challenge with the release of FICO 9. In this new scoring model, $0 balance debt collection accounts are ignored. Plus, it also gives less importance to delinquent medical debts while calculating credit score.

FICO’s next challenge for VantageScore was FICO XD score. This scoring model is slightly different in the sense that it includes cellphone and utility bill payment history, which is ignored in regular FICO score.

Read more: Tips to increase your score on 5 components of FICO credit score

The ultimate battle

The ultimate battle is, which of these scoring models will discover the best way to offer scores to consumers without any credit score. As per the financial regulators, 26 million consumers are regarded as ‘credit invisible’. Some consumers don’t have a credit file, whereas others have too many delinquent debts on their credit report.

Only time will tell if VantageScore can defeat the reigning king FICO score in the future. Until then, both are giving tough competition to each other.

Moral of the story

Ultimately, you have a good credit score and poor credit score. It doesn’t matter much if you have a VantageScore or a FICO score. Agreed that both the scoring models are different. But they don’t vary too much.

VantageScore 3.0 - Modified version of original credit score model

The revamped version of VantageScore has arrived. The much talked about VantageScore 3.0 is the modified version of original credit score model. VantageScore was introduced in the country by the leading credit reporting agencies of the nation – Experian, TransUnion and Equifax in the year 2006.

Some interesting changes have been made in the new and improved version of the VantageScore. If you’re genuinely interested to know about them, then go through the article.

Changes that have taken place in VantageScore

Check out some intriguing changes that have taken place in the VantageScore to manage your credit life in a better way.

1. VantageScore won't count negative history if you've been affected by natural disasters

After millions of consumers suffered severe problems due to the onslaught of recent natural disasters like Hurricane Sandy, several traditional financial institutions have decided to not charge fees temporarily. It seems that VantageScore has taken a cue from them. The modern version of VantageScore may overlook any negative account activity that actually happened during a natural disaster.

2. The credit score range will be like that of FICO

In the earlier version, VantageScore ranged from 501 to 990. Consumers used to get confused a lot of time since the FICO's scale was something different. The FICO credit score ranges from 300 to 850. The revamped VantageScore will have the same range from now onwards.

This will be convenient for both the consumers and lenders.

3. Your paid off debt collection accounts will not be used to calculate score

Have you paid off a debt collection account? If yes, then there's a fantastic news for you. Vantage credit scoring model won't take your paid off collection account into consideration while computing your score. Usually, when you pay off a collection account, even in full, that account is not removed from your credit report. The negative account will be still there on your credit report. FICO will use this account while calculating your credit score.

VantageScore will not include your paid off collection account into the calculation. This will be a blessing in disguise for you, especially when you’re trying to improve credit score.

4. More consumers will be able to have a credit score

Around 30 million consumers were unable to qualify for a FICO credit score due to insufficient credit history. However, thanks to VantageScore, now these consumers will be eligible for a credit score. The new credit scoring model will analyze your credit activities in the last 1 year and give you a score based upon that. Even if your credit history is as less as 6 months, then also you can qualify for a credit score.

Only time will tell if all the main lenders and credit card companies will use VantageScore in future. At present, only 7 of the leading financial institutions, 6 of the major credit card companies, 4 of the main auto lenders, 4 of the leading mortgage companies use VantageScore at the moment. It has to be seen if more and more lenders use VantageScore in future.

It is expected that VantageScore will come up with more changes in the next few months. It would be interesting to see if FICO credit scoring model also comes up with certain changes to give a tough competition to the VantageScore.

Last Updated on: Thu, 28 Mar 2013

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