Benefits for Consumers

Credit scores are an important part of everyday life. They play a significant role when banks or credit issuers consider whether (and at what terms) to approve an application for a mortgage, car loan or credit card. Credit scores are increasingly being used by non-lenders, such as insurance companies, landlords, and employers, to help them determine if they want to establish a business relationship with a consumer. The better a credit score, the more likely consumers will receive favorable terms.

VantageScore Key Benefits

Developed using information from the three major credit reporting companies (CRCs) - Equifax, Experian and TransUnion - VantageScore offers consumers easy-to-understand scoring and other advantages:

• A score lenders can use to assist more consumers
  - even those with a limited credit history
• Consistency across the three CRCs
  - Provides clarity for consumers and lenders

Why did we create VantageScore?

Simply put, the industry expressed a need for a new approach to credit scoring across the three CRCs. That solution is VantageScore. Developed with contributions from industry leading experts on credit data, VantageScore is a cutting-edge scoring model that is easy to understand.

Credit score or scores?

One of the most common misconceptions about credit scores is that everyone only has one. The truth is a bank may rely on one or several different credit scores to gauge creditworthiness; some of the larger lenders even have their own models for internal uses.

Here's how it works: Lenders typically obtain credit scores from a credit reporting company (CRC). The CRC generates a score based on the available credit data that it has compiled over time from regularly received reports provided to them by the credit-issuers with whom the consumer has relationships (banks, credit card companies, retailers, auto finance companies, etc.). While nearly every national credit issuer reports consumer data to the three CRCs, that is not always the case, especially with regional or local financial services companies.

Consistent scores across all three CRCs

Different scoring models coupled with dissimilar data and information management systems at the CRC level render a universal credit score a virtual impossibility. With VantageScore, however, the variance among the scores that the three CRCs generate is reduced since they can now all use the same credit score formula. Any differences that are seen in a VantageScore from the different CRCs can be attributed to differences in the data held in the files at each CRC.

What influences my score?

Several characteristics contribute to your VantageScore:

• Payment History: Has the consumer consistently paid accounts on time in accordance with the terms of the loan or credit arrangement?
  A history of late payments -- even by a few days -- can be potentially hurtful. Payments received beyond 30-days of the due date are considered late. When creditors report credit data to the CRCs, they typically lump payments that are late one day in with those that are late 59 days. (Each 30 days beyond the payment due date is the average interval for late payment tiers).
• Available Credit: is the total amount of credit currently available?
  Maintaining low balances on credit cards and open lines-of-credit will be a positive factor in generating a score. The typical benchmark is to keep these balances at or below 30% of the total available credit.
• Credit Utilization: How much of the total credit available is currently being used?
  Having access to credit is one consideration, and how much of that has been tapped into is another. An individual who has "maxed out" his or her credit cards and/or other lines-of-credit may not be able to obtain any additional credit or credit at the best possible terms. The lack of liquidity will deem these consumers high-risk in the eyes of lenders.
• Credit Balances: What is the total of current and delinquent account balances?
  Similar to the utilization issue, credit balances current and past provide insight into issues of financial liquidity and prudent borrowing. Historically maintaining high balances on key credit accounts will likely have a negative impact on a score.
• Depth of Credit: How long is the credit history?
  Having a strong, long history of prudent credit use is ideal under any credit scoring model. But as important as it is to have long-term credit relationships, a diverse mix of credit accounts is also beneficial.
• Recent credit: How many recently opened credit accounts and credit inquiries are on file?
  A consumer that opens a number of credit accounts in a narrow timeframe may be interpreted as experiencing cash flow problems, particularly if utilization of his or her previously existing available credit is very high. In addition, a large number of credit inquiries in a short timeframe will also lower a score. However, multiple inquires for a mortgage or auto loan will be counted as only one inquiry each, enabling consumers to shop for favorable rates without fear of lowering their score.