Understanding your credit score is important. This magic number can make a big difference when it comes to accessing credit lines, getting a mortgage or apartment rental and determining whether or not you need to leave a security deposit for your utilities.

VantageScore is one of the possible credit scores a credit reporting agency can use. It’s a model for calculating consumer credit scores developed by the three major credit reporting companies in 2006. The goal was to create a better model for predicting creditworthiness that’s easier to understand and use.

Since then, VantageScore has gone through four iterations and aims to be one of the most accurate credit scoring models on the market.

What is VantageScore?

VantageScore is one model of calculating a person’s credit score. Scores range from 300 to 850 and consider factors like credit utilization, payment history, account types, the average age of accounts and the number of new accounts.

Differences between VantageScore 4.0 and VantageScore 3.0

VantageScore 4.0 is the newest model VantageScore uses, and it was first rolled out in fall 2017. However, not all lenders use the newest model. Because of this, it’s worth understanding some of the key differences between the VantageScore 4.0 and VantageScore 3.0.

The main difference between VantageScore 4.0 and VantageScore 3.0 is that the newer model presents a more accurate prediction of your financial reliability through the use of machine learning and trended credit data available through major credit reporting agencies.

Vantage 3.0, on the other hand, just relies on your history.

VantageScore 4.0 also changed how negative credit records are treated. According to its documentation, VantageScore 4.0 gives less weight to tax liens and public records and does not include medical collections accounts when calculating scores.

How is a VantageScore different from a FICO Score?

VantageScores and FICO Scores are both models for scoring a person’s creditworthiness. The model’s goal is to determine how likely it is for a borrower to fall 90 days or more behind on a bill.

  • Scoring model: No matter where you check your VantageScore, the score should be the same. That’s because VantageScore uses a tri-bureau scoring model. FICO, on the other hand, uses bureau-specific models. That means your FICO Score can vary slightly between Equifax, Experian and TransUnion because the scores are calculated slightly differently. (Of course, this is assuming everywhere you check is using the same version.)
  • Scoring requirements: VantageScore claims its new model, VantageScore 4.0, has increased accurate reporting to individuals who weren’t previously given credit scores. This is because it can consider shorter credit histories to award a score.
  • Credit scoring factors: While the categories used to calculate your score are about the same between the two, VantageScore and FICO weigh those factors differently. These factors are payment history, credit utilization, account types, average age of accounts and new accounts.

When it comes to credit, it’s not really about a VantageScore versus FICO Score. Creditors can use one or both to understand the risk of working with a borrower. Plus, the information factored in is similar enough that the same good habits can help you improve both scores.

What makes up a VantageScore?

Generally speaking, VantageScore considers the same five categories as other credit reporting companies, but it weighs these factors a little differently. Here’s how a VantageScore breaks down and what the company advises to score highly in each category.

  • Credit utilization: Although FICO cares more about your payment history, VantageScore places the most weight on your credit utilization, labeling it “extremely influential.” Credit utilization is how much credit you currently use and your revolving balances compared to the amount of credit you have available. VantageScore’s tip for this heavyweight factor? Keep revolving balances under 30 percent of your credit limit.
  • Account types: Variety is the key to the next most important VantageScore factor: credit mix and experience. VantageScore looks for different types of accounts over time. For example, having credit available to you in the form of credit cards, an auto loan and a mortgage could represent diverse account types.
  • Payment history: Do you pay your bills on time? Late payments can negatively affect any credit score. For VantageScore, this factor is considered moderately influential.
  • Average age of accounts: It’s less important, but your accounts’ age can still affect your score. Basically, older accounts in good standing are green flags to credit reporting agencies.
  • New accounts: Just like old accounts are a good sign, opening too many new accounts at once can be a red flag. Be aware of how much credit you apply for in a short period of time.

The good news? If you can think of a factor not on the list, it likely doesn’t affect your score. Credit scores don’t consider your age, job, income or other personal data (though certain lenders might).

What is a good VantageScore?

Good credit scores can be critical when you need to apply for a large loan, like a mortgage, for example.

All credit scores are three digits and can reach a perfect 850 at their highest, although a perfect score isn’t common or necessary. For VantageScore, a good rating starts at 661, and you can achieve an excellent rating by reaching 781.

There are five tiers of scores that align closely with the other credit reporting company models. Since your exact credit score can fluctuate month-to-month based on your habits, it makes more sense to monitor which range your credit score falls within.

These are the five VantageScore ranges:

  • Excellent credit: 781 to 850
  • Good credit: 661 to 780
  • Fair credit: 601 to 660
  • Poor credit: 500 to 600
  • Very poor credit: 300 to 499

It’s important to understand which VantageScore range you fall into because it can affect approvals for things like credit cards, apartment rentals and loans. You might see a product advertised as requiring “good credit” or “fair credit,” for example.

How to improve your credit score

If your credit score isn’t in the good or excellent range and you have plans to apply for a loan or line of credit in the future, it’s worth thinking about how you can improve your credit score. There are a few simple steps you can take to start working toward a better credit score.

  • Check your credit reports: According to federal law, everyone has the right to view their credit reports for free once every 12 months. Even though you can’t view your score on credit reports, you can view your credit history. This is a good way to find any past due accounts you may not be aware of and identify and dispute errors on your report. Even without seeing the credit score itself, the information on your credit report will give you an idea of your current standing.
  • Pay your bills on time: Late payments can hurt your credit, and the longer you wait to catch up, the harder it can be to recover. Getting and staying current with your bills is a fail-safe way to improve your credit score.
  • Use less of your available credit: VantageScore and FICO both factor in credit utilization for your score. If you need to raise your score, you can work on paying down some debts so your account balances make up a smaller percent of your available credit. VantageScore advises a credit usage rate of 30 percent.
  • Don’t rush new account openings: Multiple hard inquiries aren’t the most important factors in a VantageScore, but they can still hurt your rating. Make sure you’re only opening new accounts when you need the credit.

How to check your VantageScore

There are both paid and free ways to check your VantageScore. One way to view your score is to pay for access through one of the major reporting companies. Equifax, Experian and TransUnion all offer paid access to your credit score.

While paid access can come as part of a package deal with other features like credit monitoring or boosts, there are plenty of free ways to access your credit score, too.

For instance, may credit card issuers offer access to your VantageScore just for having an account. American Express, on the other hand, offers a free a VantageScore and credit report to anyone, regardless of if they’re an American Express customer.

Get free access to your credit report each week

Normally, consumers are entitled to access their credit reports for free once every 12 months. While this is a good start, a lot can happen in a year, and if you wait too long to spot problems with your score, the damage can take some time to reverse.

Equifax, Experian and TransUnion are currently offering free weekly, online credit reports. These reports include a detailed history of your credit accounts. (These weekly reports do not include your credit score.) To get free weekly access to your report, you can visit AnnualCreditReport.com and follow the required steps.

The bottom line

With a consistent model used for all credit reporting companies, understanding your VantageScore gives you a clear picture of how creditors and lenders view your risk level as a borrower. The incorporation of machine learning and credit trends can make the newest model, VantageScore 4.0, more accurate than others.