VantageScore

Banks and financial institutions evaluate your creditworthiness before offering you credit in the form of a loan or a credit card. This evaluation is carried out with the help of credit scores calculated and published by authorised credit bureaus and rating agencies. 

However, credit scores are not the only scores that help financial institutions measure your creditworthiness. In the US, there is also something called VantageScore, which is similar to a credit score in several respects. Let’s understand the meaning and various aspects of VantageScore in detail.

VantageScore is a relatively new concept that was introduced in 2006. The top three credit bureaus in the US (Equifax, Experian, and TransUnion) developed the concept of this score which serves as an alternative to the credit or FICO score (used in the US). VantageScore measures your credibility as a potential borrower. However, it gives new borrowers some leeway so that they become eligible for credit facilities.

The three credit bureaus mentioned above calculate individuals’ VantageScore, which ranges from 300 to 850. They use ML (Machine Learning) technology to assess and evaluate consumers’ creditworthiness. 

Many financial institutions and credit bureaus allow you to check your VantageScore and get a credit report. You can check your VantageScore through Equifax too. The process is as follows:

• Visit the Equifax website and click on the option that calculates your credit score.

• Provide your information, and the calculator will calculate your VantageScore.

• You can also sign up and create an account with Equifax. After you do so, you will get a monthly update on your VantageScore.

Equifax also offers a detailed credit report that indicates your past and present credit and how you used them. You can put in a request for the credit report and access a detailed account of your credit behaviour.

Since it was introduced, VantageScore has had various versions. The first types of VantageScores were VantageScore 1.0 and VantageScore 2.0. Both these versions measured your creditworthiness using a range between 501 and 900. 

However, newer versions have been developed now. They include VantageScore 3.0 and VantageScore 4.0, both of which are used currently. Let’s have a look at the primary differences between these two types of scores:

While VantageScore varies from 300 to 850, it can be categorised into different ranges that measure your score on a spectrum from very poor to excellent. Let’s have a look at these ranges:

Just like a high credit score is beneficial, a high VantageScore also has various benefits. A high VantageScore indicates that you are creditworthy and can repay your debts on time. This allows you to avail yourself of multiple benefits. These benefits are as follows:

• You can reduce the premium payable for your insurance policies, especially for car insurance plans.

• You can reduce the interest rates on your credit cards and loans.

• You can easily become eligible for any credit facility.

• You can enjoy higher credit limits on your credit cards. Moreover, when your VantageScore is high, you can avail yourself of a higher quantum of loan for your financial needs.

• When looking for mortgage loans, you would have more housing options to choose from.

• You can get hassle-free utility services without higher security deposits or collateral.

Having a good VantageScore is important if you are looking for any credit facility. A good score helps you achieve the following:

• Makes you eligible for the loan or credit card

• Helps you negotiate the interest rate on your debt

• Gets higher loan amounts sanctioned

• Gives higher credit limits

Moreover, a good score also impacts other aspects of your financial life, such as insurance policies, availability of loans, etc. 

Therefore, it is essential you maintain a good VantageScore at all times.

Your VantageScore is affected by various factors, including:

• Repayment history, i.e., when you repay your utility bills and debts. If you pay off your bills and liabilities in a timely manner, you will have a good repayment history, enhancing your VantageScore. On the other hand, if you default on any of your payments, your score will be adversely affected.

• A higher credit utilisation rate also damages your VantageScore. You should, thus, try and limit your credit usage.

• A lower credit limit and higher existing debts damage your VantageScore.

• Making too many loan applications within a short period is not wise as it damages your VantageScore.

• Having only one form of credit in your portfolio is also detrimental to your VantageScore.

Improving your VantageScore is quite simple. Here are a few tips:

• Pay your bills on time, without any defaults

• All your loan instalments and credit card payments should be done in a timely manner

• If you might default on your payment, inform the lender and try to arrange for an alternative so that your VantageScore is not affected

• Try and keep your credit utilisation rate low, below 30%

• Have a diverse mix of credit facilities in your portfolio

• Keep old credit accounts open

• Do not make too many credit applications within a short time

• Maintain good credit behaviour 

Your VantageScore is also an important criterion when you are looking for credit facilities. Understand what this score is all about, how it’s calculated, and what affects it. Try and maintain a high score to get credit on the most favourable terms.