The ability to reach underserved borrowers is increasingly a “table stakes” differentiator that a credit score model must feature. That’s why I encourage readers to click through to read a column in the Orange County Register entitled, “Fannie, Freddie’s old FICO standards squeeze millions of would-be homebuyers.”
The article illustrates the value offered by VantageScore 4.0, which features, among other benefits, the ability to accurately score approximately 40 million more consumers than legacy models. This group includes some 10 million consumers who have VantageScore credit scores of 620 or higher; 2.4 million of whom are either African American or Hispanic.
The article, which is syndicated and has been picked up in many other top-100 daily newspapers, points to the fact that the GSEs continue to require lenders to use outdated models that exclude millions of borrowers…effectively freezing them out of achieving the American Dream of homeownership.
Approximately 2,200 lenders have recognized and are leveraging the value of VantageScore credit scoring models. In addition to a wider applicant base, lenders using VantageScore 4.0 receive value from a model that uses trended credit data so they can provide better decisioning and risk separation among higher scoring (i.e., Prime and Superprime) consumer segments, where separating riskier consumers becomes more difficult.
More broadly speaking, VantageScore brings great value to the marketplace. This month we celebrate our 15th anniversary. The marketplace, which for years had a single provider of generic credit scoring models, has benefitted greatly from the competition we brought to the table.
That competition has created a platform for lenders to test alternative data and new and innovative modeling techniques, including machine learning and AI. Competition has also paved the way for more consumer-friendly features, such as easy-to-understand reason codes, free credit scores, and the elimination of paid collections from the calculation of a consumer’s credit scores.
It may surprise you to hear it from me, but the fact that other startup model developers have come on the scene is actually a source of pride for us. It should never be a one- or even two-horse race.
Competition makes markets better and more efficient. Period.
And that’s the value that VantageScore has brought over the past 15 years. Here’s to making the next 15 years just as exciting and disruptive!
Please read on, as this month’s newsletter is chock-full of great content, including our launch episode of “The Game Plan,” a chance for you to vote for a winner of “Lights, Camera, Save!” (a student video contest we sponsored for ABA Foundation), a “Did you know” article on how credit scores may change dramatically and a “5 Questions with…” Dhani Jones, host of our web series on CNN.
At your service,
Barrett Burns, CEO and president, VantageScore Solutions