FICO vs FAKO? Here Are the Facts.

Date: January 24, 2018

Dear Colleague:

It’s customary to ring in the New Year with forward-looking goals, aspirations and resolutions. We, at VantageScore, are perpetually moving forward but based on some recent comments from our esteemed competitor, I’m not sure they share the same focus.

I’m speaking of comments that the CEO of FICO made to the Financial Times where he accuses two very large financial services companies of giving “FAKO” scores to consumers.

Whether you look at his statements from a competitive standpoint or from an industry standpoint, they lack justification and come from a bygone era.

Here’s what I mean by that:

From a competitive standpoint, VantageScore has made serious inroads however you slice it. The one exception, of course, is that we remain barred from use by the GSEs. Setting that aside, our models are now used by lenders of all shapes and sizes for all of the same purposes as FICO, however you slice it.

To wit, I am pleased to share with you more information that drives home this point. Every year the credit reporting companies (CRCs), who compete with each other to sell VantageScore credit scores to market participants, are surveyed in order to understand how our market adoption is trending.

To add an extra layer of credibility, this year a highly respected third party firm, Oliver Wyman, a global leader in management consulting and research, was hired to dig into the numbers. Here are some key takeaways from their report:

  • Of the more than 8.5 billion credit scores used, approximately 75% (or more than 6 billion) were used by lenders, confirming VantageScore credit scores are being used across the entire lifecycle of consumer lending and almost every relevant industry category.
  • There are more than 2,700 unique users of VantageScore credit scores. Of those unique users, more than 2,200 were financial institutions.
  • Credit card issuers used approximately 4.9 billion of the total number of VantageScore credit scores, with the 10 largest card issuers accounting for approximately 83% of this volume.

FAKO score? I think not.

And, here’s what I mean when I say that the FAKO commentary doesn’t make sense from an “industry standpoint.” Well-articulated by my colleague Mike Trapanese in a LinkedIn post, he states that (I’ve underlined the key message):

This is like Kleenex calling Puffs a fake tissue brand. Disappointing to see a good CEO resort to playground tactics.

FICO is peddling a fantasy in its battle to build a consumer brand. There is no single, golden key to credit. There is no universal standard that all lenders use: they look at a mix of information and so should consumers. Both Capital One and Chase provide free tools to put each consumer’s credit score in context and explain what it says about his or her credit history. That context is the most important part, and for FICO to suggest otherwise is self-serving and, frankly, wrong.

Lansing suggests, “We think there is room for confusion.” Apparently, FICO intends to exploit it.

The Oliver Wyman study also notes: “Many lenders pull multiple credit scores to underwrite each new loan, and therefore it is impossible to extrapolate market share for VantageScore specifically.” That being the case, I submit that it is also impossible for any score provider to provide reliable market share statistics. The point is that: No one can possibly know the denominator of such a calculation or, said another way, no one knows how many credit scores are used in total and thus any claims about a specific percentage of market share are questionable at best.

Plenty more about our market adoption is included in another article in this month’s newsletter, along with another view on the FICO/FAKO debate from credit score expert John Ulzheimer. We also have a terrific piece on how our new model leverages machine learning in order to score those with limited credit histories more accurately, and an update of our Default Risk Index. And I am very pleased that my good friend Bill Emerson, vice chairman of Rock Holdings Inc. (the parent company of Quicken Loans), joins us as this month’s guest for our “Five Questions With” column.

And as the Irish say this time of year, “May the best day of your past be the worst day of your future.”

Happy New Year.


Barrett Burns

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