Credit score competition: be a force for change

February 1, 2019

Any Star Wars fans out there? The iconic trilogy ended with “The Return of the Jedi,” which was released in 1984. Perhaps other than its creator, George Lucas, we all thought the masterpiece had come to a thrilling and suitable end.

Au contraire! Fast forward to today and Hollywood is rolling out new sequels, prequels and spin-offs every year!

Not to make light of a very serious matter, sometimes I feel as if our efforts to introduce competition into the mortgage market have taken on a similar, saga-like feel.

The latest installment was the Federal Housing Finance Agency’s (FHFA) publishing in the Federal Register an 18-page Notice of Proposed Rulemaking. As my note mentioned last month, the proposed rule was supposed to interpret and set into motion the credit score competition provision of the ‘‘Economic Growth, Regulatory Relief, and Consumer Protection Act’’ (Public Law 115-174), which was passed into law last spring.

The law requires FHFA to establish standards and “criteria for any process used by an enterprise to validate and approve credit scoring models …” and Fannie Mae and Freddie Mac to “establish validation and approval process[es] for the use of credit score models.”

In other words, the law was aimed at introducing a competitive market in which mortgage lenders and borrowers are able to continue to assess the latest breakthroughs and potentially leverage the features and benefits of various different, preapproved models.

Instead, as it is currently proposed, the rule would perpetuate and strengthen FICO’s current monopoly by making nearly all of FICO’s current competitors “ineligible” as a result of various newly proposed requirements that were not originally included in the Credit Score Competition Act.

Here’s why this matters and how you can help:

In order to keep pace with shifting population demographics and changing borrower behaviors (detailed last month in this newsletter), it is critical that lenders have the ability to leverage recent scoring innovations. Such innovations will only continue if credit score model developers compete on an even playing field.

We have paved the way for positive changes in the credit scoring market. Among many first-to-market innovations that are now widely accepted, VantageScore was the first model to eliminate paid collection accounts to prevent them from penalizing a consumer’s score. We also extensively increased the population of consumers who can be reliably scored using the latest model development methods and provided increased transparency to help consumers understand their credit health.

In order for the marketplace to leverage these benefits, and embrace what competition will create for the future, the proposed rule must be dramatically revised.

The good news is that THE RULE IS NOT FINAL. Industry participants are urged to provide their feedback through a comment period that will end on March 21, 2019.

Competition is good for consumers and good for the industry. We’ve posted information and addressed industry concerns on our website.

Your comments will shape how the rule is implemented.

Further information and the portal for comment solicitations is on the FHFA’s website here. We strongly encourage your input and would be happy to provide additional information upon request. Send inquiries to

Oh … and may the Force be with you!


Barrett Burns

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