One of the questions we wrestle with the most is how much information is too much information. This challenge relates to consumers, lenders and regulators interested in our credit scoring models.
For lenders, some want deep-dive, analytically-driven analysis to ensure model performance, safety and soundness, while others want to know simply, “What’s in it for me?”
To effectively do their jobs, regulators must also have access to the intricacies of our models including our fair lending and predictive performance testing.
By the same token, we want consumers to be empowered to make prudent credit decisions and to fully understand the implications of their actions on their resulting credit score. But what’s the best way to accomplish this without confusing them with “industry speak” and jargon?
For consumers, financial literacy and credit education delivered in an interactive, bilingual way is absolutely critical. For lenders, model transparency and governance should be the focus.
I believe we do this as good as, or better, than anyone. But as an industry we should always strive to do better.
Along those same lines, I’m pleased to include in this month’s newsletter the results of our annual model performance assessment. A short overview is included in this newsletter, which links to a detailed paper that examines VantageScore 4.0 (our latest model) across the following important parameters:
- Predictiveness for both the Mainstream consumer population (i.e., those who are conventionally scored by generic scoring models) and the approximately 40 million consumers who are considered “Newly Scored” (i.e., those who can be scored with VantageScore 4.0 but fail to meet the required criteria by conventional models).
- Consistency of the VantageScore 4.0 scores obtained from all three of the national credit reporting companies (CRCs) and the predictive performance associated with those scores.
- Statistical bias, if any, related to the ethnicity of various consumer groups.
We are unique in that we make this information public. Having said that, this is only the first step for lenders. Lenders should validate their own proprietary models, as well as vendor-developed models such as VantageScore, and do so within their own unique lending environments.
As I mentioned, this is one way we seek to increase education surrounding our credit scoring models. Below I’ve listed a number of other resources we make available to address this challenge:
For consumers:
- Consumer education and awareness
- FAQs, articles, blogs, infographics
- Searchable database of reason codes with explanation tips
For lenders:
- Detailed whitepapers & user guides
- Documentation based on regulatory standards to facilitate model governance activities
- Deep-dive sessions on attributes and design
- Conversion support through the three national credit reporting companies
For regulators:
- Model education, engagement, our testing methodology and results and response to inquiries
All of this information is available on our websites: www.vantagescore.com (for lenders) and www.yourvantagescore.com (for consumers).
Best,
Barrett Burns
CEO and president, VantageScore Solutions