VantageScore Solutions Announces Major Strides in Market Adoption

Date: January 29, 2015

Number of Scores Used Increases by Nearly 600 Percent

STAMFORD, Conn., January 29, 2015 – VantageScore Solutions, LLC, the company behind the VantageScore® credit scoring model, announced today the results of a study performed by a third-party to determine the extent to which the model is used and tested in the consumer credit market.

The study found significant usage of all three versions of the VantageScore model, VantageScore 1.0, 2.0, and 3.0. Specifically, nearly one billion VantageScore credit scores were used in 2014, by over 2,000 lenders and other industry participants, including six of the 10 largest banks. This represents a 24 percent increase in the number of users of the VantageScore models and a nearly 600 percent increase in the number of scores used as compared with 2013.

Additionally, over 3 billion VantageScore credit scores were pulled in the last year, including scores used for decisioning, model building, and testing purposes.

“With this surge in market adoption, the consumer finance industry, including the largest banks in the country, clearly have voted for choice in the marketplace and are taking advantage of the transformative differentiators offered by the VantageScore model,” said Barrett Burns, president and CEO of VantageScore Solutions. “Lenders are seeking ways to enhance portfolio performance and the ability to leverage new segmentation technologies and data streams, and our model delivers on this value proposition. The VantageScore model expands a lender’s universe of applicants, offers greater consistency of scores and provides a greater level of predictiveness supported by more-refined segmentation so that lenders can grow their portfolios and millions more consumers can gain access to mainstream credit.”

Greater access to credit

VantageScore Solutions is able to generate a score for 98 percent of those consumers with credit files at the three credit reporting companies, including 30-35 million consumers typically not scored by conventional models. Among those consumers conventionally unscoreable, 10 million are attractive loan candidates, with scores of 600 and above on the VantageScore 3.0 scale range of 300-850. VantageScore Solutions’ research also found that the risk levels of these newly scoreable consumers align with consumers exhibiting conventional credit management behaviors and, from a fair lending perspective, 9.5 million of the newly scored consumers are African-American or Hispanic, of whom 2.7 million have credit scores above 600.

While these consumers can gain access to credit via the many lenders currently using the VantageScore 3.0 model, mortgage lenders are not able to leverage automated underwriting systems typically used to originate mortgage loans because Fannie Mae and Freddie Mac’s seller/servicer guidelines require lenders to use outdated 2004 credit scoring models.

“Locking out credit scoring models that are more inclusive and can score millions more consumers is not only anti-competitive and unfair to consumers, it hurts the GSEs themselves,” said Jim Carr, housing finance, banking and urban policy expert. “Acceptance of more inclusive credit scoring models has an obvious upside for the GSEs in the form of additional credit-worthy mortgage applicants. Moreover, the housing market and economy in general stand to benefit by the increase in demand for homes by consumers who were otherwise unnecessarily frozen out of the market for all intents and purposes.”

Lenders demand choice and competition in the credit scoring market

According to three surveys of lenders conducted independently of one another, there is increasing pent- up demand for newer credit score models and choice in the marketplace.

  • In the fall of 2013, a SourceMedia survey found that nearly 30 percent of lenders use more than one credit score model and 52 percent of lenders would consider a model other than FICO for mortgage originations if they could.

  • In 2014, a Spectrum Associates survey found that 67 percent of lenders involved in the selection of which credit score model their institution will use are at least “reasonably likely” to adopt a new model that is proven to perform better than their current one.

  • Also in 2014, a FTI Consulting survey found that 74 percent of lenders would consider using a different credit scoring model for their mortgage origination business if the GSEs didn’t require the use of FICO scores.