VantageScore introduces VantageScore 4.0
Earlier this month, VantageScore Solutions announced completion of VantageScore 4.0, its fourth-generation tri-bureau credit scoring model.
The new model, which is scheduled to be available for commercial use in the fall of 2017, is based on consumer credit files from the years 2014–2016. As a result, the model reflects the variety of credit products available in today’s market, and current consumer borrowing and payment behaviors.
VantageScore 4.0 also incorporates several groundbreaking new modeling techniques:
VantageScore 4.0 is the first tri-bureau credit scoring model to be built in anticipation of data suppression under with the National Consumer Assistance Plan (NCAP), an initiative by the three national Credit Reporting Companies (CRCs) aimed at making credit reports more accurate, transparent and understandable.
As the CRCs roll out NCAP improvements, tax-lien information and other public records data, historically found in consumer credit files and used to calculate consumers’ credit scores, will likely be eliminated either in whole or in part.
With those anticipated changes in mind, VantageScore 4.0:
- Distinguishes medical collections from other types of collection accounts, ignores medical collections less than six months old (to allow time for insurance-payment processing) and penalizes consumers less for medical collections than for nonmedical ones.
- Relies less on derogatory collections and public-records data to ensure that the model will not lose substantial predictive strength in the event that these items are removed from consumer credit files under NCAP provisions.
The introduction of VantageScore 4.0 further underscores that lenders should evaluate how their incumbent models perform with and without NCAP data to determine whether there will be a detrimental impact on predictive performance and approved populations.
Trended credit data
VantageScore 4.0 is the first tri-bureau credit scoring model to incorporate trended credit data attributes. These attributes track the trajectory of borrowers’ behaviors as opposed to merely reflecting static events.
The new model also applies VantageScore’s patented characteristic-leveling processes to these attributes, preserving unequaled score consistency across all three CRCs.
As a result, VantageScore 4.0 achieves substantial gains in predictive performance, particularly among consumers in the Prime and Super Prime credit bands, resulting in a lift of nearly 20 percent for originations among Prime consumers.
VantageScore 4.0 scores some 30–35 million consumers who cannot obtain a credit score when conventional scoring models are used. To further enhance the accuracy of scores assigned to this population, VantageScore 4.0 model developers leveraged machine learning techniques in the development of scorecards for those consumers with sparse credit histories (i.e., those with no trade lines or credit accounts).
This has led to a performance lift of 30 percent for the population of consumers with sparse credit files.
Building on past innovation
Our latest model builds on the success of VantageScore 3.0. VantageScore 3.0 helped drive the adoption of VantageScore credit scores by more than 2,400 lenders and other market participants, and the use of more than eight billion VantageScore scores during the 12-month period from July 2015 through June 2016.
One of the many VantageScore 3.0 innovations that are retained in the new model is the ability to score 30–35 million more consumers than competing model brands, and to improve transparency and score consistency across all three CRCs.
VantageScore 4.0 also outperforms VantageScore 3.0 across all credit industries. In particular, the incorporation of trended credit data across an expanded applicant pool and the 5.4 percent lift in predictiveness associated with mortgage origination, position VantageScore 4.0 as an ideal tool for use in the mortgage market, a market in which only outdated FICO models are currently accepted as the result of a monopoly that has been effectively sanctioned by the federal government.
“In VantageScore 4.0, we’ve developed a tool that provides benefits associated with portfolio growth, consumer fairness, inclusion and model governance,” said Sarah Davies, senior vice president for research, analytics and product development at VantageScore Solutions. “These are areas of concern for lenders and their regulators as well as consumers and those who advocate on their behalf.”