STAMFORD, Conn., December 9, 2016 – VantageScore Solutions, LLC, developer of the VantageScore®credit scoring model, today announced the launch of the Default Risk Index (DRI), an interactive tool that will track the changing levels of default risk in four major consumer lending categories.
The DRI website, DefaultRiskIndex.com, lets users monitor the shifting quarterly risk profile of loan originations in the mortgage, credit card, auto, and student loan categories. The DRI is derived using credit file data from TransUnion and VantageScore odds charts—tables furnished to VantageScore users that match values on the 300-850 VantageScore scale range with their corresponding probability of default (PD) values.
The Default Risk Index is a measure of relative changes in risk level, benchmarked against the third quarter of 2013, the first period for which data were compiled. Interactive tools at DefaultRiskIndex.com allow users to view trends for each loan category and freely download the data behind the charts.
The VantageScore Default Risk Index is provided as a free resource to institutional and individual investors, professionals in the securitization field, academics and all others interested in systemic lending risk. It will be updated quarterly, with data reflecting loans issued in the preceding quarter.
Getting the Most out of Asset-Level Disclosures
The DRI was developed by VantageScore Solutions and TransUnion to highlight the limitations of the traditional use of credit scores in evaluating risk for categories or pools or loans. As the structured finance industry incorporates the asset-level disclosures required by SEC Regulation AB II, the DRI highlights an opportunity to gain an analytical advantage using credit scores.
Today’s common practices—using “weighted average” or “distribution by score band” as summaries of risk— are mathematically flawed. Reliance on these metrics can miss the true credit quality of a loan pool, obscure meaningful trends, and lead a well-intentioned analyst to the wrong conclusions.
“We developed the Default Risk Index to present a better way to use credit scores in evaluating categories or pools of loans,” said Mike Trapanese, senior vice president for strategy and strategic alliances at VantageScore Solutions. “As the securitization industry moves towards more loan-level data, there is an opportunity to use credit score disclosures in a more meaningful and accurate way. While the DRI is published at the national level, it demonstrates an approach that analysts can apply to their own portfolios and investment strategies.”
About VantageScore Solutions
Credit scores can impact everything from whether you get a loan and how much you might pay in interest to whether you are able to rent an apartment.
VantageScore Solutions, LLC (www.VantageScore.com) is the independently managed company that owns the intellectual property rights to the VantageScore credit scoring models, including the VantageScore 3.0 model, which scores 30-35 million consumers typically not scored by conventional models without relaxing standards. VantageScore credit scores are used by lenders, landlords, utility companies, telecom companies and many others to determine your creditworthiness. By using the VantageScore model, these enterprises have access to many more consumers, and in turn, consumers have greater access to mainstream credit.
This “win-win” is due to VantageScore’s innovative, highly predictive, patent-protected, tri-bureau scoring methodology that provides lenders and consumers with more consistent credit scores across all three national credit reporting companies. VantageScore is also the model tens of millions of consumers use to monitor their credit behaviors through dozens of websites and lenders who provide their users and customers with their credit scores for free.
The company is celebrating its tenth anniversary in 2016.