Understanding The New VantageScore Scale
The new VantageScore credit scale uses letters and not only figures like the traditional FICO score does. Many people are having difficult time to adapt to the new credit scale, which was made to assist everyone understand their credit situation better.
The FICO score scale which runs from 350-850 is the more popular credit scale used, but with credit grades ending at 850 evaluating a persons credit position is more complicated. The new VantageScore scale may take some more time to become familiarized by the markets, but once used it is more friendly to understand.
In this short review we will try and explain the VantageScore letters scale, so next time you see a credit score in letters and not in the traditional figures, the overall picture would be much clearer.
Why Vantage Uses Two Scales – Figures & Letters
The VantageScore scale and algorithm calculates different factors, all contributing to the credit score outcome. This ‘credit score’ figure is used by lenders and credit companies to predict the financial risk from each customer and analysis the payment behavior expected from them. The score was developed by the three national credit reporting companies (CRCs) — Experian, TransUnion and Equifax to standardize the credit ratings.
Another user for this credit score, is the customer himself. A person needs this figure to qualify for mortgages and credit cards and other loans.
The VantageScore has two scales, each developed for a different purpose. The lenders and creditors will continue to request and use the numeric figures, just like the FICO score they request and use today. The main different is that the Vantage scale runes from 501-990, so it is more intuitive to evaluate and calculate.
For example 738 FICO score is a great score, but how much better is it than 690? With the VantageScore Scale these kind of calculations are more easy to be done, and make more sense for people who are not mathematicians.
For the regular average credit customer, these factors and figures even make less sense. For the credit customers VantageScore build the easy to understand credit letter grades. The letter grades resemble the school grades which everyone remembers, thus understanding at each point the credit score situation is easy and appealing.
VantageScore Grades And Their Meanings
The VantageScore has 5 level of grades just like the school grades. On this credit scale, a person gets the personal credit score as if they were still at school. One person may get a ‘D’ score and another person will get a ‘B’ score. Just like at school, these grades are easy to follow and make sense when trying to understand the current credit position.
‘A’ Score Grade – This grade is the best grade you can achieve, like at school A students get the best treatment from the teachers, ‘A’ credit score will allow the customers to shop for the best home loans and best mortgage rates offers. The top tier of credit holders with score between 900-990 pose the least risk thus getting the best financial terms.
‘B’ Score Grade – These customers are at the top 59% of the credit holders with score ranging from 800-899 they will probably be accepted at any office and offered fairly low rates for loans and credit cards.
‘C’ Score Group – This score group will have more challenging times shopping for loans and credit rates, with Vantage Score between 700-799 they are still welcome at most lenders since they drive a high revenue. The customers at ‘C’ group are not in the ‘bad credit – not welcome’ group, they will be qualified for mortgages and will pay higher rates. Lenders fear them but need them since they will likely pay their payments on time (most of the time) and will borrow money at the higher rates than groups ‘A’ and ‘B’.
‘D’ Vantage Score – Means these customers are risky to acquire for the lenders. Lenders can expect credit troubles and delayed payments. In the eyes of the lenders lending money is an uncertain bargain, and they might need more efforts and resources to see the money paid back regularly. A score of 600-699 is very low at the new VantageScore scale, for this reason they will ‘sell’ their money at very high rates to cover losses or expected foreclosures. They will request more documentation and more down payments than other score groups.
‘F’ Score Group – People with Vantage score lower than 600 may see a ‘NOT WELCOME’ sign at many lender’s offices, lending companies are profit oriented, and lending money to ‘F’ group borrowers at current times is beyond their risk management analysis. ‘F’ grade means these people are at the lowest 19% grades from all the millions of U.S customers. If credit or loans are processed a very high interest rate will be attached to compensate for the risk involved.
Vantage Score Scale Conclusion
Most people do not realize how much they would save per year by repairing their credit score. If it is a FICO score or a VantageScore, having a low grade score means paying up to thousands of dollars each year (can reach hundred dollars per month savings!).
Repairing the credit score is easier than most people think and can be done alone with a few simple tweaks.
So What is The Next Step?
If you will do nothing.. don’t expect anything to happen.
Every week you are wasting money.. sending dozens of dollars to the rich credit companies, who relay on you to keep doing NOTHING.
If your score is below 700, you might want to do something about it – get this ‘Credit Repair University’ which will save you money and time.
Yes, you might need to invest a small sum to get a grip of things.. But if you think education is expensive.. try ignorance..
You are probably paying thousands of dollars per year in fees and interests to credit companies which could be going straight to your pocket.
So do your math… and take action NOW.