How one credit scoring company is thinking about financial inclusion

July 8, 2022

Silvio Tavares, CEO and president of VantageScore, wants to expand credit access with more and empirically accurate consumer data

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Marketplace tech radio | July 8, 2022

All this week, we’ve been looking at the data and algorithms behind credit scores. While many lenders will use FICO scores, thousands also rely on FICO’s competitor – VantageScore.

It was founded by the three credit bureaus — Experian, Equifax and TransUnion — in 2006. The company, which is independently managed, says its scoring model is more inclusive and predictive of credit risk than traditional models.

“Marketplace Tech” host Kimberly Adams recently spoke with Silvio Tavares, president and CEO of VantageScore, about what he and his team consider when they’re designing their algorithms. The following is an edited transcript of their conversation.

Silvio Tavares: The reality is, establishing someone’s credit worthiness requires an enormous amount of judgment. It’s really important [to consider] the decisions around which data is factored in — and how. Let me give you an example of that. VantageScore was one of the first companies to come up with the idea of eliminating paid medical debt. Two thirds of the collections accounts were related to medical debt. And when we looked at the data, what we found was that if you had actually paid off your medical debt, just the fact that you had a medical debt collection didn’t really indicate anything about credit worthiness. We also determined that a lot of those paid medical debts disproportionately hit people of color. So those are the key types of decisions that [as] modelers, we have to take into account. It’s about getting the best objective data, and looking empirically to see what types of data sets are best at empirically predicting whether someone is creditworthy or not.

Kimberly Adams: What are you doing at VantageScore to make sure that all of the data feeding into your algorithm and your model comes from consumers that have, in a knowledgeable way, agreed that you can have this information?

Tavares: We work with banks and lenders, and fintech lenders, to make sure that they are collecting data in a way that is transparent and where the consumer has provided their consent. But really most of that is going to be done by the bank, it’s not going to be done by VantageScore. We focus on the algorithm and making sure that it’s fair, it’s equitable and, most of all, that it’s predictive, and a really good predictor of whether the consumer is going to repay.

Want more? Read the full transcript on Marketplace Tech. This media was originally aired and posted on Marketplace Tech Radio on July 8, 2022.