A credit-scoring company owned by Equifax, Experian and TransUnion has set up an index that aims to predict losses in loan pools, including those used as securitization collateral.
VantageScore Solutions of Stamford, Conn., plans to launch its Default Risk Index today at defaultriskindex.com. The product, available free-of-charge, tracks origination volume and default risk among auto loans, credit-card accounts, mortgages and student loans dating back to 2013.
The website also spells out the methods behind the index.
VantageScore is shopping the service in part to buyers of asset- and mortgage-backed securities. Part of its pitch: As technological improvements and the SEC’s Regulation AB make loan-by-loan data more available, risk evaluations for loan pools will become more precise than those relying on average credit scores.
VantageScore plans to update borrower scores quarterly while weighting their default probabilities. “We developed the DRI to help bridge the knowledge gap between credit scores and the actual risk they represent,” senior strategist Mike Trapanese said. “Investors have been valuing loan pools under the assumption that the risk associated with any given credit score doesn’t change, which of course isn’t true.”