Five answers with VantageScore standard-bearers
This section of The Score newsletter usually features a profile of a credit-industry newsmaker, whom we interview by asking Five Questions. For this special Tenth Anniversary edition of the newsletter, we’re inverting that format, and posing a single question to be answered in turn by five newsmakers – leaders who have been involved with VantageScore Solutions for the bulk of its history, and who have played critical roles in steering the company to the success it enjoys today.
VantageScore Solutions CEO Barrett Burns, the company’s first employee, has been at the helm since 2006. Sarah Davies, who joined in January 2007 as senior vice president, is chief architect of the VantageScore 2.0 and 3.0 models and leader of the company’s analytics team. Mike Gardner of Equifax, Lloyd J. Parker Jr. of Experian, and Steve Sassaman of TransUnion have all served important advisory roles as board members representing the member companies that formed VantageScore Solutions in 2006, and that retain joint ownership of the independent company as members of VantageScore Solutions, LLC. The question:
When you talk to lenders about VantageScore, how is the conversation different now than it was shortly after VantageScore was introduced in 2006?
Barrett Burns, VantageScore Solutions President and CEO:
The narrative in general is different. By that I mean, ten years ago there was a lot of distrust regarding credit scores. There was a lack of knowledge and myths persisted. There seemed to be pent-up demand for education among lenders, advocates and consumers alike. So over these past 10 years we have spent considerable time sitting face-to-face with lenders, regulators, and consumer advocates discussing how our models work. Over time, I believe we’ve turned that skepticism into credibility for VantageScore.
There was also some concern that we were introducing a new model that some perceived as not having been around long enough to have been time-tested. Having performed exceptionally well through the Great Recession, that is no longer an issue.
major difference is that regulators used to inadvertently refer to a
specific brand of credit scoring model when proposing regulations,
issuing publically available guidance or requiring industry reports. By
engaging with the regulators, we made it understood that they could be
perceived as providing a “brand endorsement,” and they quickly
communicated to lenders that in no way did they intend to favor any
single brand of scoring model.
Carry that forward, and discussions with lenders have changed because they are no longer concerned with VantageScore models meeting regulatory hurdles. Now, the discussion focuses on the value proposition that VantageScore brings to their businesses and their customers.
Sarah Davies, Senior Vice President for Analytics, Product Management and Research, VantageScore Solutions:
To me, there is a fundamental shift in the way credit scores are used and viewed. Whereas before it was only a three-digit proxy used by lenders in credit strategies, today a credit score is just as much a consumer tool. Whether it’s lenders providing the scores to their customers as a value-added benefit or educational websites providing scores for free, credit scores are now as much about interacting with consumers as they are about credit underwriting.
The other major change is the pace of innovation. Innovation has accelerated as competition has been introduced, but as models change in significant ways, implementation by lenders remains a challenge. We as model developers must recognize this as we continue to improve how models are built.
These two trends, along with the fact that we endured one of the worst recessions in history, certainly contributed to increased regulatory scrutiny. Regulators are now much more concerned that credit risk tools function within appropriate ranges. Consequently, model governance and transparency have now become a necessary and appropriate focus.
I believe these are all net positives for the financial institutions and for consumers. It sets up a very interesting future for credit scoring.
Mike Gardner, Senior Vice President, Specialized Services and Initiatives, Equifax:
VantageScore at the 10-year mark is most definitely viewed by lenders as a well-regarded, robust capability that provides an additional level of competitive scoring insight enabling better lending decisions. VantageScore today is frequently the “go-to” resource.
Lloyd J. Parker Jr., Group President Credit Services, Experian North America:
Before March of 2006, many risk managers in the financial services industry agreed that the credit scores needed a shakeup. Essentially, we heard from lenders, there were no options – if you wanted a generic credit score it was a one-size-fits-all proposition. But our clients needed choices, and knew that innovation and competition would be a catalyst for change and improvement. Now, our clients recognize the tangible value that VantageScore brought to the lending marketplace by fixing some of the fundamentals, such as calibrating the score across all three credit reporting companies and providing the ability to score more people. What hasn’t changed in our conversations with clients is their desire for the most sophisticated risk management tools available to accurately assess risk in a way that is compliant, unbiased and highly predictive.
Steve Sassaman, Chief Revenue Officer, TransUnion:
In the last 10 years, we have observed significant adoption and recognition of VantageScore across several industries. Recently, we have observed more traction in the direct-to-consumer and prescreen spaces as VantageScore is being relied on even more in the underwriting process. The continued acceptance and use of VantageScore has been partly fueled by the fact that we can more clearly align with the regulatory environment and help expand the credit universe. We expect the use and acceptance of VantageScore will only continue to grow in the next 10 years.