VantageScore Default Risk Index receives an update and media attention

Date: June 24, 2020

VantageScore Solutions recently completed the first quarterly update to the VantageScore Default Risk Index (DRI), an interactive website developed with TransUnion to track quarterly originations risk in four consumer-lending categories—mortgage, bankcard, auto and student loans.

The update coincided with the publication of an op-ed about the DRI that appeared in the Asset-Securitization Report (ASR).

Headlined “Industry’s Flawed Reliance on Credit Scores Leads to Confusion” and written by VantageScore EVP Mike Trapanese, the ASR article spotlights the DRI’s strategic goal of exposing a major flaw in the way many securitization-industry professionals measure risk in pools of consumer loans: The mathematical invalidity of the common practice of using average- or weighted-average credit scores to evaluate risk in batches of loans. The DRI instead provides an accurate representation of portfolio risk by converting credit scores to their corresponding probability of default (PD) values—a superior methodology that is thoroughly explained at the DRI site with supporting videos and a detailed white paper.

The best way to experience the update to the DRI data series is by visiting DefaultRiskIndex.com and experimenting with its interactive tables and charts. The update is also summarized in the table below and in the following observations, which appear in commentary boxes on the site:

Default Risk Index: The moderation in risk taking that began in 2014 largely extended into the third quarter of 2016. After an expansion in risk taking in early 2015, 2016 saw continued contraction. On average, only bankcard lenders have risk appetites comparable to those of late 2013, at the start of the DRI data series.

Quarterly Snapshot: Mortgage, auto, and student lenders took marginally less risk in the third quarter. Card lenders, however, moved in the opposite direction, with a small increase in risk profile.

Total Originations: Origination volumes increased in all four sectors, with the strongest growth driven by the seasonal uptick in student lending.

Industry

Total Originations

Probability of Default (Weighted Avg.)

Default Risk Index

DRI vs. Last Quarter

DRI vs. Same Quarter Last Year

Mortgage

$505.2 B

0.96%

82.5

-3.4%

-4.8%

Bankcard

$97.0 B

2.82%

100.5

2.0%

2.8%

Auto

$163.4 B

4.01%

91.1

-5.4%

-5.2%

Student

$48.4 B

15.24%

73.7

-21.7%

-2.9%

The Default Risk Index exemplifies VantageScore’s commitment to innovation, transparency and thought leadership. The Index is winning attention in the important securitization and asset-ratings industries for which it was designed. DefaultRiskIndex.com is well worth exploring.