Page 24 - Credit Matrix: The Path To Financial Liberation Blue Contract

The Vantage Score

In the same hushed atmosphere of the library, Mr. Moor shifts the focus to
another significant aspect of credit scoring – the Vantage Score. "While the FICO
score is well-known," he begins, "The Vantage Score is another vital tool in
understanding credit risk, particularly for lenders. It's a unique model that
evaluates the age of a borrower's credit history in conjunction with their credit
behavior."

1. **Age of Credit History (40% of Your Score)**: "In the Vantage Score model," Mr.
Moor adjusts his glasses, "40% of your score is determined by the age of your
credit history. This percentage reflects the importance of how long you've been
managing credit. For example, a credit history that spans 20 years is generally
more favorable than one that's only 5 years old, as it indicates a longer track
record of financial responsibility."

2. **Credit Utilization Over Time (25% of Your Score)**: "This factor accounts for
25% of your Vantage Score. It's not just your current credit utilization that
matters, but how this ratio has varied over the years. Consistently maintaining a
low utilization rate, say, below 30% of your total credit limit, positively impacts
this portion of your score."

3. **Historical Payment Behavior (20% of Your Score)**: "Here, we allocate 20% to
how your payment behavior has evolved. For instance, moving from a history of
missed payments to a record of timely payments over several years can
significantly improve this aspect of your score."

4. **Frequency of Credit Applications (10% of Your Score)**: "Frequency and
timing of new credit applications contribute to 10% of the Vantage Score. An
increase in credit applications in a short period can negatively impact this
portion, especially if it deviates from your usual pattern of credit inquiries."

5. **Diversity of Credit Over Time (5% of Your Score)**: "This element, while
having a smaller weight of 5%, assesses the variation in types of credit over your
entire credit history. For example, early establishment and maintenance of a mix
of credit types (like revolving credit, installment loans, etc.) enhance this part of
your score."