Getting Different Credit Scores

What is and Who Uses Vantage Score?

With a market so overwhelmingly dominated by FICO, consumers are apt to ask who uses Vantage Score. According to the company, 90% of the largest lenders in the U.S. use the FICO credit scoring model before making lending decisions. 75% of residential mortgage applications are also decided with the help of FICO according to the same sources. The company’s long list of clients (built up from 1986 when FICO was first introduced) even includes 25 of the largest issuers of credit cards and auto loan providers in the country. So where does all these put Vantage Score?

What is Vantage Score and where is it in the industry relative to FICO?

Getting Different Credit ScoresVantage Score is one of the dozens of other non-FICO credit scoring systems. It was created by the three Credit Reporting Bureaus (Equifax, Experian, and Trans Union) and introduced to the market only in 2006. The three Credit Reporting Bureaus collaborated with each other to develop a more predictive alternative credit scoring model that can reach more consumers than FICO.

Vantage Score is considered by its creators as the next generation credit scoring model. In contrast to FICO, it gives more weight to payment history than the length of the credit. Vantage veers away from the traditional credit scoring method which weighs on credit history a lot, leaving the “thin file” consumers, those who never availed of credit, and those just starting their credit relationships without credit scores and effectively squeezing them out from availing of loan opportunities.

According to Tower Group, a financial research firm, 10% of U.S. Lenders now use Vantage Score.  And if we are to believe the company’s figures, their list of current clients include 4 of the top five financial institutions in the country; five of the country’s top credit card issuers; 2 out of the top 5 auto loan providers; one of the 5 highest ranking mortgage loan providers. So far Chase Bank has been the only one so far to have acknowledged its use of Vantage Score.

Verified or not these claims may be, there is still no denying that Vantage has started to make inroads into major industry. After being in the market for barely six years and considering the fact that the well entrenched FICO has been in the market uncontested for almost three decades, you can consider this a great achievement with still brighter prospects for the future.

Who then may find Good Use for Vantage Score?

Because of its unique credit scoring methodology, Vantage Score can reach more consumers including the 35 to 50 million strong ‘thin file’ consumers representing 18% to 25% of the country’s adult population. This includes the young adults about to embark on their new careers; recently arrived immigrants, divorced or widowed personalities with no credit histories of their own, people digging out of bankruptcies, and people who hardly availed of credit in the past.

This market is by all accounts huge but has been traditionally left out by design from availing of credit by 90% lenders using the FICO model. Vantage can now effectively score them thus, giving lenders an opportunity to assess their credit worthiness and provide credit despite them not having a long credit history.

Entities and institutions who may find good use for Vantage Score include companies in highly competitive industries who’d want to discover new niches to market their products. This will include companies like auto lenders, credit card providers, and home mortgage loan providers.

Vantage’s growth may be slow but it definitely is a sure way to make an inroad into a market long dominated by a single provider and where the cost of a changeover to a new credit scoring model can be prohibitive for now.