Dear Colleague,
A recent article and video segment on the VantageScore 3.0 model, published and shown on CNBC.com, inspires my column for this issue of The Score.
The piece nicely represents what our brand stands for, which includes innovation, predictive strength and dedication to the consumer.
CNBC recently created an online news program called “The Big Data Download” that spotlights the latest trends in data analysis and companies that can harness huge data sets to help businesses grow. (VantageScore, itself, is a good example of effectively using big Big Data for years.)
The host of the program, Courtney Reagan, interviewed VantageScore Solutions Senior Vice President Sarah Davies about the innovative use of more granular data in the VantageScore 3.0 model, and how the model accounts for growth in student loan defaults, among other post-recessionary trends that impact consumer-credit behaviors.
Those defaults and the huge uptick in student-debt volume are among a variety of changing factors that influence the way consumers behave. To be as accurate as possible, credit scoring models must be able to account for these and other post-recessionary changes.
Reagan also specifically asked about the ability of the VantageScore 3.0 model to utilize alternative data such as rent, utility and telecom payments to calculate a consumer’s credit score. Our models are built to meet the demands of the present and to anticipate the future. The fact that VantageScore 3.0, like both models that preceded it, can use this data to score consumers is a tribute to the great foresight, innovation and progressiveness of the developers of all three VantageScore models.
The current impact of alternative data is minimal, due to the small number of consumers whose credit files contain such data. But having spent a considerable amount of time with regulators and consumer advocates, I can tell you there is a strong desire for more alternative data to populate consumer credit files, because that information can be used to match underserved borrowers with mainstream credit grantors.
Rest assured that as more alternative data becomes available, the VantageScore model can help lenders and consumers take advantage of it.
This month’s newsletter is predominately focused on industry topics, but as always, our “Did you know” article focuses on information helpful to consumers. This month, we focus on why shopping for the best loan terms and rates is as important—if not more so—than your credit score. This is a message that cannot be driven home enough.
We also survey what lenders believe about the millions of consumers who are unscoreable under traditional credit score models, and summarize a recently published white paper focused on how the FDIC has changed its definition of a high-risk loan in relation to what a large lender will pay in deposit insurance assessments. As usual, also included is an update to the Index of Banking Activity, and I’m very pleased that “The Risk Doctor” Cliff Rossi stands in to answer our monthly “Five Questions.”
Sincerely,
Barrett Burns