Credit-scoring tools vs. reality today
In today’s environment, lenders need to continue to innovate and adapt. The lending industry is facing challenges with the possibility of a cycle change and increasing competition from all sides of the marketplace including the tech sector.
As described in a new model overview, the VantageScore 4.0 model offers significant benefits over conventional models by utilizing better data and more innovative model development techniques to score millions of consumers that were previously “unscorable”. Using this model, which includes trended credit data and machine learning, 241 million consumers are now scorable, including 40 million who could not be scored by other conventional models.
Conventional models tend to rely heavily on a consumer’s depth, breadth, and tenure of credit. VantageScore 4.0 goes beyond these factors to look at the trajectory of borrow behaviors over time, which reveals additional insights into consumer credit behavior.
Recent advances in computer power and machine learning algorithms are making it possible to look for deeper insights in data. The VantageScore 4.0 model can identify relationships between data that provide additional correlation on a borrower’s likelihood of default. This has value in cases with the previously “unscorable” consumers who may have a limited credit history or a lack of recent credit history.
VantageScore Solutions firmly believes in transparency and the importance of knowledge sharing. It is the only credit score model developer to publish detailed results of its annual model assessments along with communications aimed at model users and consumers. To read the full article, click here.