VantageScore Solutions White Paper Explains Uses of Credit Scores in the Secondary Market

Report Illustrates How Probability of Default (PD) Measurements Enhance Risk Evaluation

STAMFORD, Conn.--()--VantageScore Solutions, LLC, the company behind the VantageScore® credit scoring model, announced today the availability of a new white paper explaining how credit scores are used in the consumer loan securitization process.

Securitization is an essential source of capital for loan issuers and credit granters, and credit scores play an important role in the pricing and evaluation of risk in securitization portfolios, also known as Master Trusts.

The VantageScore white paper includes:

  • A description of the securitization process
  • A credit scoring primer
  • Demonstration of how shifts in consumer credit risk can lie hidden behind credit scores
  • Strategies for analyzing and preparing for shifts in consumer credit risk

“As the collapse of the mortgage backed security market certainly attests, there was a clear disconnect among secondary market participants about what credit scores can and cannot do,” said Sarah Davies, senior vice president at VantageScore Solutions for research, analytics and product development. “Too few investors realized that the credit scores they relied on to gauge risk did not change, but the default rates associated with those scores increased dramatically.”

The white paper explains how investors can protect themselves from this hidden risk by understanding the relationships between credit scores and their associated probability of default (PD) values at any moment in time. Applying that understanding enables accurate measurement of risk within a portfolio, and enables more-sound management of Master Trusts.

“The net impact is that using the three-digit credit score value as the sole reference point for risk in the Master Trust can seriously misrepresent risk leading to incremental losses and exposure,” said Davies. “As lenders continue to use many different credit scoring models in their decisioning process, using PD will be an important tool to ensure an accurate analysis and expectation for losses.”

Accompanying the whitepaper is a webcast that explains the lifecycle of credit scores in the securitization process as well as comments about the secondary market for consumer loans by Gregg Silver, chief financial officer at 1st Financial Bank USA and former treasurer of the Structured Finance Industry Group (SFIG). The webcast is currently available on VantageScore Solutions’ website, at

About VantageScore Solutions

VantageScore Solutions, LLC ( is the independently managed company that owns the intellectual property rights to the VantageScore credit scoring models, including the VantageScore 3.0 model, which provides up to 25 percent predictive improvement over earlier models and is able to generate a score for 98 percent of those consumers with credit files at the three credit reporting companies (Equifax, Experian and TransUnion), including 30-35 million consumers typically not scored by conventional models. VantageScore Solutions’ highly predictive models use an innovative, patented and patent-pending tri-bureau scoring methodology that provides lenders and consumers with more consistent credit scores across all three national credit reporting companies. Nearly one billion VantageScore credit scores were used in 2014, by over 2,000 lenders and other industry participants, including six of the 10 largest banks.


VantageScore Solutions
Jeff Richardson, 203-363-2170

Release Summary

VantageScore Solutions announces the availability of a whitepaper explaining how credit scores are used in the secondary market.


VantageScore Solutions
Jeff Richardson, 203-363-2170