A Challenge to FICO
In 2006, the three major credit bureaus, Experian, Equifax, and TransUnion announced that together they had developed a new credit scoring system, which they named Vantage. Their goal was to mount a viable challenge to the widely used FICO system.
A Good Effort
Vantage was not the first attempt by the bureaus to challenge FICO. In fact, each of the bureaus had previously created scoring systems on their own, none of which made any inroads into the lender market. Together they believed that they could make enough of an impression to finally gain market traction.
The Potential Payoff
The bureaus have enormous financial incentive to develop a scoring system to rival FICO. Every time a lender purchases a FICO score from one of the bureaus they must pay a fee to Fair Isaac. If the bureaus could cut Fair Isaac out of the picture it would be a financial windfall.
The Early Failure
The early version of the Vantage Score was poorly received. The Vantage range of 501 to 990 was confusing to everyone, and lenders long entrenched with FICO found little reason to test the waters. In 2013 however, the Vantage Score 3.0 model was introduced.
The Winning Formula
The revamped Vantage 3.0 model generates scores from 300 to 850, while, in a bold shift, the new model calculates scores for consumers with as little as one month of credit history, compared with the FICO six month minimum history requirement.
On the consumer site, Vantage 3.0, with its familiar score range, and low price point, has become a top choice for websites that sell credit reports and monitoring services to consumers, expanding both awareness and acceptance among the public. And lenders, often eager to increase the risk profile of their portfolio during good economic times, have begun to turn to Vantage to pre-qualify these previously overlooked consumers.
FICO Still Dominates, but…
Although Vantage has made inroads, FICO is still the top and often sole choice for both mortgage and auto lenders. Vantage is a great low cost option and a great tool for tracking credit score changes, but be aware that the score a lender pulls may differ from the Vantage Score that many consumer sites offer.