STAMFORD, Conn.--(BUSINESS WIRE)--VantageScore Solutions, LLC, developer of the VantageScore credit score model, released a new white paper that substantiates the need for more modern credit score modeling techniques to score today’s consumer. “Improved Assessment of Credit Health Using Trended Credit Data” showcases, through empirical analysis, how leveraging trended data provides better risk separation, and a more fair opportunity for consumers.
Traditionally, most credit scoring models use a “static” credit view (i.e., the most recent credit report) to analyze a consumer’s creditworthiness which only offers a one point-in-time snapshot of a consumer’s use of credit.
New research from VantageScore demonstrates that trended credit data provides a more complete risk assessment, enabling decisions to rely more on actual credit management behaviors of consumers and less on the length and depth of credit use history. These decisions ultimately result in lower default rates.
VantageScore data scientists found that 32% of consumers, roughly 1 in 3, see a credit tier change when trended credit data is factored into their credit score with most of the shifts occurring in the Prime and Super-Prime tiers. Additionally, consumers who were “swapped up” into a higher credit tier exhibited 20-40% lower default rates compared to those consumers who were “swapped down” from that same credit tier into a lower level. These findings held across all loan types (e.g., auto, credit card, mortgage, installment) as well as for originations and account management functions.
Consumers who shifted downwards might have had longer tenures using credit and less delinquencies historically – both of which are static attributes weighted heavily by many conventional credit scoring models – but they also possessed significantly higher credit card balances and rising utilization rates over time. By contrast, those consumers whose scores increased demonstrated positive behaviors such as more aggressive payments on installment loans and lower and more stable utilization rates over the past 12-months.
VantageScore 4.0 is the only tri-bureau generic scoring model to use trended credit data by evaluating a consumer’s credit behavior over a longer period of time; ultimately, providing a more comprehensive look at a consumer’s overall credit health.
“What this study shows is that consumer behaviors are outpacing many of the models in use today,” said Barrett Burns, CEO and president, VantageScore Solutions. “Not only does trended credit data provide a great opportunity for lenders to better identify riskier consumers, but consumers benefit because they can recover from a missed payment or two and build credit more easily. Fundamentally, a consumer has no power over the age of her or his credit and we are now able to recognize that and provide a better approach.”
For more details and to access the white paper “Improved Assessment of Credit Health Using Trended Credit Data”, visit: www.VantageScore.com/TrendedDataWP.
About VantageScore Solutions
Credit scores can impact many aspects of your life, everything from whether you are able to get a loan and how much interest you will have to pay to whether you are able to rent an apartment. At VantageScore, we understand the impact of credit scores and we take that responsibility seriously.
VantageScore Solutions, LLC (www.VantageScore.com) is the independently managed company that owns the intellectual property rights to the VantageScore credit scoring models and is the leader in scoring innovation. The VantageScore 4.0 model scores approximately 40 million consumers who typically are not scored by conventional models – without sacrificing predictiveness.
VantageScore credit scores are used by lenders, landlords, utility companies, telecom companies, and many others to determine creditworthiness. A recent study found that approximately 12.3 billion VantageScore credit scores were used by over 2,500 unique users from July 2018 to June 2019. By using the VantageScore model, these enterprises have access to many more consumers, and in turn, consumers have greater access to mainstream credit.
While there are many credit scoring models in the industry, the “win-win” for VantageScore is its innovative, highly predictive, patent-protected, tri-bureau scoring methodology that provides lenders and consumers with more consistent credit scores across all three national credit reporting companies.