VantageScore

VantageScore is a consumer credit-scoring model, created through a joint venture of the three major credit bureaus (Equifax, Experian, and TransUnion). The model is managed and maintained by an independent company, VantageScore Solutions, LLC, that was formed in 2006 and is jointly owned by the three bureaus.[1]

VantageScore models compete with the credit scoring models produced by Fair Isaac Corp. FICO.[2][3] Like the models developed by FICO, VantageScore models operate on data stored in the consumer credit files maintained by the three national credit bureaus. VantageScore models and FICO models use statistical analysis on that data to predict the likelihood a consumer will default on a loan. VantageScore and FICO models represent risk of loan default in the form of three-digit scores, with higher scores indicating lower risk. VantageScore and FICO use different, proprietary analytical methods, and scores from one system cannot be translated into one from the other.

VantageScore vs FICO score

VantageScore and FICO are developers of competing credit scoring models. FICO, the original creator of the FICO Score, was not involved with the creation of VantageScore's formula.[4]

VantageScore, FICO and the credit bureaus have allowed the public to know some information about the credit score categories and the corresponding calculation weights. FICO allows consumers get their generic or classic FICO score for Experian, TransUnion, and Equifax from myFICO website. Consumers can get their VantageScores from free credit report websites, and TransUnion and Experian offer VantageScores to consumers for a fee through their websites.[5]

In contrast with FICO's credit scoring models, which are custom-built for each of the three national credit bureaus, to accommodate structural differences in the bureaus' databases, VantageScore model design allows one single model to operate on all three bureaus' data.[6] VantageScore Solutions holds several patents on processes that ensure pieces of data within each bureau's consumer database will be treated identically, regardless of differences in database structure.[7][8][9][10] These methods eliminate much, but not all, discrepancy in VantageScore scores obtained at the same time from different credit bureaus. Some variation is unavoidable because factors such as the timing of lenders' payment-information reports can mean the contents of a given consumer's credit file will differ somewhat at each of the three credit bureaus.[11]

The first two VantageScore models (VantageScore 1.0, issued in 2006, and VantageScore 2.0, released in 2010) used a scale range of 501 to 990, and assigned letter grades to various bands within that range, according to TransUnion:

A: 900–990
B: 800–899
C: 700–799
D: 600–699
F: 501–599

VantageScore 3.0, the version of the model released in 2013, adopted a scale of 300 to 850.[12] VantageScore attributed the change, which matches the scale range used by FICO models, to the fact that consumers were more familiar with it than with the original VantageScore range, and because a 300-850 scale would make it easier for lenders to incorporate the VantageScore into automated systems.[13]

Score calculation

While the exact details of how the score is calculated are unknown, VantageScore has released the main factors that influence scores, and their relative significance:[14]

VantageScore calculation categories
Category Description Weight[15]
Payment history how timely and consistent your payments are Extremely influential
Age and type of credit length of credit history and types of credit previously received Highly influential
Percent of credit limit used debt-to-credit ratios and how much credit is available Highly influential
Total Balances/Debt what your total debt is, most likely; delinquent debt is counted more harshly than current debt Moderately influential
Recent credit how recent and many new hard inquiries and new accounts there are Less influential
Available credit how much credit can be accessed, for example, could you spend $50,000 of credit tonight or within the next week Least influential

See also

References

  1. ↑ https://your.vantagescore.com/why-we-exist
  2. ↑ http://www.forbes.com/sites/nickclements/2015/12/01/vantagescore-threatens-fico-credit-score-dominance/#752f8e664178
  3. ↑ http://finance.yahoo.com/news/vantagescore-vs-fico-score-difference-150323240.html
  4. ↑ Fair Isaac's Reply to the VantageScore, From a FI Employee - The Credit Info Center Forums
  5. ↑ http://www.vantagescore.experian.com/factors.html
  6. ↑ https://www.vantagescore.com/consistent
  7. ↑ http://patents.justia.com/patent/7801812
  8. ↑ http://patents.justia.com/patent/7930242
  9. ↑ http://patents.justia.com/patent/7974919
  10. ↑ http://patents.justia.com/patent/8055579
  11. ↑ https://www.vantagescore.com/consistent
  12. ↑ VantageScore from Experian
  13. ↑ https://www.vantagescore.com/easy-implementation
  14. ↑ https://your.vantagescore.com/score-influences
  15. ↑ http://www.vantagescore.com/images/resources/VantageScore3-0_WhitePaper.pdf

External links

This article is issued from Wikipedia - version of the 9/21/2016. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.