VantageScore
Candlefocus EditorAt the heart of VantageScore is a “machine learning” system which mines the wealth of data collected by the three credit rating agencies mentioned above. It looks at factors such as the length of a person’s credit history, payment history, outstanding debt obligations, number of accounts, credit utilization, and types of credit being used. The system then outputs a score ranging from 300 to 850, with a higher score representing greater creditworthiness.
An important point to note is that VantageScore was designed with two key differences in mind. Firstly, the customer data required to generate a VantageScore score is much less stringent than that used by FICO, with some consumers that may not have enough data to generate a FICO score, still having a VantageScore. This has enabled lenders to assess more people on their creditworthiness. Secondly, VantageScore takes into account recent activity in order to create a more up-to-date rating. This means that if a consumer has a sudden drop in their financial situation, it won’t be accounted for until the subsequent VantageScore update.
To this point, VantageScore is a valuable alternative to the FICO score that enables lenders to assess more customers on their creditworthiness. With the help of “machine learning” and more up-to-date informaiton, VantageScore is a credit rating system that offers lenders valuable insights into a consumer’s financials.