What are the factors that go into VantageScore®?

Quick insights

• Your credit score is one of the important factors of your credit profile.
• Understanding the credit scoring model’s category your score falls into can help you be more informed about your credit situation.
• There are key factors that are considered when generating a VantageScore, such as payment history and credit utilization.

VantageScores come in varying models, but the one used perhaps most widely by lenders is the VantageScore 3.0 model. However, all models generate a three-digit credit score that helps lenders determine your creditworthiness, which basically is your ability to make payments on time. Credit scores are also used to help determine your credit limit, annual percentage rate (APR) and more.

Exploring the VantageScore ranges

The VantageScore 3.0 model generates a score ranging from 300-850 and breaks down into the following credit score categories:

• Excellent (781-850)
• Good (661-780)
• Fair (601-660)
• Poor (500-600)
• Very poor (300-499)

Credit scores provide lenders a snapshot of your creditworthiness. The higher your score the more you show that you would be likely to pay back your debt, so you could be more likely to get approved and qualify for more favorable terms and rates.

A common misconception is that having a poor credit score must mean you are broke and having an excellent credit score means you are rich. However, your credit score does not capture the full scope of your financial situation and your behaviors. Let’s review the factors that are (and aren’t) considered when determining your VantageScore.

What are the VantageScore 3.0 factors?

The VanatageScore 3.0 model is made up of several factors. These include:

• Payment history (41%). Payment history is the most heavily weighted factor and refers to your ability to make your payments on time consistently. Just one missed payment can decrease your credit score.
• Depth of credit (20%). This refers to the various types of credit and length of credit history. Generally, the longer and more diverse your credit portfolio, the better.
• Credit utilization (20%). Your credit utilization ratio is the amount of credit you use against your total available credit. For example, if you had $10,000 of total available credit and used $1,000 of that, your credit utilization ratio would be 10%.
• Recent credit (11%). When you apply for new lines of credit, your potential lender runs a hard credit check, which can temporarily hurt your credit score.
• Balances (6%). Your outstanding balances, including credit card debts and loans.
• Available credit (2%). This is the amount of total available credit you currently have access to.

 These percentages are as of October, 2024.

What VantageScore does not consider

Your credit score doesn’t capture everything about you. There are several factors that the VantageScore model does not consider but may play a part in your overall financial health and your ability to get new lines of credit. These include:

• Income. While your debt-to-income ratio is an important factor lenders consider when evaluating loan applications, it is not included in the VantageScore model.
• Employment history. Similar to income, employment history may be considered by your potential lender as part of an application process, but it is not used to generate your credit score.
• Assets and savings. The VantageScore model does not take into account your assets, savings or investments when calculating credit scores. While these factors may contribute to your overall financial health, they are not used in the credit scoring process.

It’s possible for someone to have a large income but a poor credit score, and someone to have little income but an excellent credit score. Your credit score only captures a piece of the larger financial picture.

Is it important to have a high credit score?

Not only is it important to understand your credit score, but it can also be just as important to strive for a good one. The higher your credit score, the better your chances may be of getting approved for lines of credit. Additionally, good credit scores may allow you to unlock more favorable terms, such as the potential for lower APRs and access to higher lines of credit. When used responsibly, credit can have a positive impact on your overall financial health.

In conclusion

Your VantageScore is a helpful indicator of your credit health, but it doesn’t capture everything. Understanding what goes into calculating a VanatageScore can help you make adjustments to your current credit behavior as you strive for a better credit profile. By understanding which credit scoring model and category your credit score falls into, you can continue to build your knowledge and take charge of your credit health.