| |
 What is the VantageScore credit rating system? |
| |
|
|
| |
| Explaining what is the VantageScore credit rating system is need to be taken into context of FICO scoring world. The three major credit agencies, Equifax, Experian and TransUnion calculate a slight variation of the classic FICO score. They also calculate their own scores: The Beacon score for Equifax, The Experian Score and the Experica from TransUnion. The desire to normalise credit scoring has lead the three companies to develop in unity a common ruled score called the VantageScore as defined here. |
| |
 |
| Who created the VantageScore rating system |
|
 |
|
| |
| The big three National Credit reporting companies, Equifax, TransUnion and Experian have come together to develop a common rating system called the VantageScore. What the VantageScore is is a effort o bring consistency to the scoring process. Identifying ways to homogenise the credit scoring algorithm through all 3 companies was a clear objective of the new credit worthiness calculation. It is the first system that the majors have developed together using new data design and calculation and innovative modelling to increase risk assessment. |
| |
|
| Why was it created and how does the VantageScore work? |
|
|
|
| |
It was believed that lenders such as banks, credit card issuers, loan providers needed a uniform system of scoring. Because the FICO rating has variations from the three CRCs a new approach would streamline the ratings. Al the more, the newer VantageScore is a proponent to better risk assessment. Under this score more people have obtained higher scores for better ratings due to a more precise algorithm. On the other hand credit risks have also been better identified under the VantageScore.
The VantageScore pocesses greater consistency allowing the reduction of fluctuations between the three National Credit reporting companies and it applies identical methods to scoring multiple inquires. The improved segmentation capabilities of the system allows a highly predictive model that is more efficient in automated models. So in addition to being more precise the VantageScore is more ergonomically suited to automated electronic credit ratings systems and processes. |
|
|
| |
|
| What is the VantageScore Scale? |
|
|
|
| |
The VantageScore rating scale is divided into 5 levels:
A level score 901 to 990
B level score 801 - 900
C level 701 - 800
D level 601 - 700
E level 501 - 600
The scores are calculated using the same source of data and takes the data from the same time periods for all three CRCs through the same algorithm. You will notice that the range has increased. If in the FICO grading 750 was a good to average score it is just average in the VantageScore scale. having a higher score requires you to have a Prime Plus or Super prime rating. Names are give to the top two tiers of the VantageScore rating scale. |
| |
|
| Uses and advantages of the VantageScore |
|
|
|
| |
The VantageScore integrates people that currently do not have accounts in the credit files, It also can give scores for deceased people as well as for consumers that have not had any financial data added to their credit score in the past 24 months.
It is a new grading system for consumer credit worthiness. The uptake and usage of it is still new due to the lack of track record. The mortgage industry is slow to pick it up due to the need of historical basis notably with the 2nd hand mortgage market.
As long as the credit as an individual has credit information many of the elements and weights in the VantageScore will resemble that of the FICO score. Creditors and lenders banks and credit card companies will eventually like the increase risk assessment model and start adopting more readily, but as of yet, the FICO score stills stands as the most import credit rating system for individuals needing credit approval. |
| |
