Big Changes to Your VantageScore — and Why It Doesn’t Matter

New changes to VantageScore are coming soon. Yes, the score may be changing but it doesn’t matter to you. VantageScore is not used for credit cards, mortgages, or loans.  

VantageScore vs. FICO score

VantageScore vs. FICO score

What is VantageScore?

VantageScore is a consumer credit-scoring model created by three major credit bureaus — TransUnion, Equifax, and Experian. The VantageScore places more weight on the trends in a person’s credit report, as opposed to a snapshot with the FICO score.

When is VantageScore used?

  • Credit Karma: free credit score

  • Secondary markets: when banks sell your loans, each loan in the pools has VantageScore checked (i.e., collateralized debt obligations)

  • Random things: Apartment applications (maybe)

Credit cards, mortgages, and auto loans only care about your FICO score.

What if VantageScore matters in the future?

Fair question. That’s a real possibility given that the three major credit bureaus created the Vantage Score.

Long term, there are ways to mitigate it. VantageScore focuses on how much debt you can get.

The first major change is: the more available credit limit you have, the worse you are. VantageScore sees this as risky behavior because you can get yourself into a lot of debt.

  • Mitigate this by lowering your credit limits. Example: if you have a $100,000 combined credit limit, but only utilize $5,000, you can lower your credit limit to $10,000.

  • There are a few financial institutions that may cut you off or close your accounts if you have too much credit limit. American Express is one of these institutions.

The big picture

VantageScore looks at the bigger picture of your financial history, as opposed to the FICO score that looks at a snapshot.

The way to mitigate this is to pre-pay your credit cards and not keep a balance. Those with high balances on their statement are seen as more risky. If you pre-pay your cards, the balance falls off before the statement is issued.

Ask yourself: are you aggressively paying off your debt?

If not, this might be a good time to start. 

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