the latest defaultriskindex com quarterly update

The latest DefaultRiskIndex.com quarterly update

Date: June 24, 2020

In December of 2016, VantageScore launched the DefaultRiskIndex.com (DRI), an interactive online tool that monitors lender default risk in the four major consumer loan categories: mortgage, bankcard, auto loans and student loans. Updated on a quarterly basis, the DRI now has results from the end of last year (Q4 2016) available for perusal.

The results showed lenders’ risk appetite in the following categories:

  • New card and auto loans showed marginally more conservative risk profiles than the previous quarter, while mortgage loans showed the opposite trend.
  • Student loans were once again the outlier, where the seasonal pattern continued to bring low volumes and higher risk loans in the fourth quarter when compared to the fourth quarters of years’ past.

The DRI was developed by VantageScore Solutions and TransUnion to highlight the limitations of the traditional use of credit scores in evaluating risk for categories or pools of loans. Common practices, such as using a “weighted average credit score” or “distribution by score band” as signs of risk, are inaccurate. Reliance on these metrics can miss the true credit quality of a loan pool, obscure meaningful trends and lead a well-intentioned analyst to the wrong conclusions.

The DRI is an opportunity to gain an analytical advantage, using the probability of default as a more accurate assessment of how loan pools can be analyzed. To further help analysts make more informed decisions, DRI results can also be tracked against past quarters and can be downloaded at DefaultRiskIndex.com. Since launching last December, industry professionals have been using this valuable resource to gauge default risk appetite and guide industry decisioning.