New Independent Research Finds VantageScore 4.0’s Increased Reliability Unlocks Millions in Auto ABS Market Savings

• VantageScore 4.0 Reduces Variance in Auto Loan Bad Rates by Up To 75% Compared with Traditional Scores
• Consumers Newly Scored by VantageScore 4.0 Demonstrate Better or Same Credit Performance Compared to Populations Scored by Traditional Models for Auto Loans
• VantageScore 4.0 Unlocks Millions in Capital Efficiencies for Auto ABS Market Through Credit Enhancement and Reduces Lifetime Transaction Costs

SAN FRANCISCO--(BUSINESS WIRE)--New research from OGMA Risk and Analytics reveals that the VantageScore 4.0 credit scoring model unlocks significant financial efficiencies in the auto asset-backed securities (ABS) market, potentially reducing financing costs, improving credit risk assessment and expanding access to capital. The whitepaper, titled “VantageScore 4.0 in the Auto Loan ABS Market: What the Data Shows on Reach, Performance and Reliability,” finds that, on an illustrative $1 billion Near Prime auto ABS transaction and under stated assumptions, using VantageScore 4.0 could release approximately $11 million in credit enhancement and generate approximately $4 million in cost savings over the life of the deal. These findings demonstrate that VantageScore 4.0 can help auto lenders and securitization market participants more accurately evaluate credit risk while improving the economics of auto loan securitizations.

"Credit scoring is fundamental to how auto loans are originated, securitized and ultimately valued by investors," said Rikard Bandebo, EVP, Chief Strategy Officer and Chief Economist at VantageScore. "OGMA’s research demonstrates that VantageScore 4.0 can deliver meaningful financial benefits throughout the securitization process. By providing a more reliable assessment of credit risk, VantageScore 4.0 has the potential to unlock millions of dollars in capital efficiencies while expanding opportunities for creditworthy consumers who have historically been overlooked by traditional scoring models."

The whitepaper evaluates VantageScore 4.0 across three critical measures: the ability to score more consumers, the credit performance of newly scored borrowers, and the reliability of credit score bands in predicting losses. The analysis uses a nationally representative 1-in-20 sample of the U.S. consumer credit population covering 2023 through 2025, with 24 months of observed credit performance following each consumer's observation point.

Key findings from the research include:

MORE RELIABLE CREDIT SCORING IMPROVES RISK ASSESSMENT: VantageScore 4.0 delivers significantly greater consistency in predicting credit losses than traditional scoring models. Within comparable credit score bands, bad rates vary 75% less than those associated with a generic account management score on existing accounts and 45% less than those associated with a generic origination score. This improved reliability provides auto ABS issuers, investors and rating agencies with a more dependable measure of underlying credit risk, potentially enabling more precise pricing and credit enhancement requirements.

NEWLY SCORED CONSUMERS DEMONSTRATE COMPARABLE CREDIT PERFORMANCE: Consumers scored exclusively by VantageScore 4.0 recorded a 24-month bad rate of 18.3%, compared with 20.0% for consumers also scored by traditional models at equivalent credit scores. Additionally, 46% of newly scored consumers have VantageScore 4.0 credit scores of 620 or higher, demonstrating that consumers excluded by traditional scoring models are not necessarily higher-risk borrowers. The findings reinforce the ability of VantageScore 4.0 to identify creditworthy consumers without compromising risk assessment standards.

IMPROVED CREDIT RISK PRECISION COULD UNLOCK MILLIONS IN CAPITAL EFFICIENCIES: On an illustrative $1 billion Near Prime auto ABS pool, the combined benefits of broader scoring coverage, improved risk differentiation and greater scoring reliability could release approximately $9 million to $11 million in credit enhancement and save approximately $2 million to $4 million in costs over the life of the deal. These modeled benefits reflect the potential for more accurate loss projections, reduced capital requirements and improved securitization economics.

As the largest segment of the consumer asset-backed securities market, auto ABS relies heavily on credit scores to evaluate collateral quality, estimate expected losses and determine the credit enhancement required to support securitized transactions. However, traditional credit scoring models leave millions of consumers without a score, creating challenges for lenders seeking to originate loans and issuers seeking to finance those loans through capital markets transactions. VantageScore 4.0 addresses these limitations through its use of trended credit data, available alternative credit data and advanced machine learning techniques. By evaluating consumers with shorter or less active credit histories, the model expands the population of scorable borrowers while delivering more consistent risk differentiation across credit score bands.

For auto ABS issuers, VantageScore 4.0’s greater scoring coverage and improved reliability should support more efficient loan pool construction, more accurate credit enhancement sizing and stronger investor confidence in reported credit risk metrics. For lenders, the findings point to opportunities to improve capital efficiency and expand responsible access to auto financing.

OGMA’s research underscores the important role VantageScore 4.0 plays in strengthening the transparency, efficiency and predictive accuracy of consumer credit securitization markets.

To download and read the full whitepaper, please visit VantageScore’s website.

About VantageScore®

VantageScore is the fastest-growing credit scoring company in the U.S., and is known for the industry’s most innovative, predictive and inclusive credit score models. In 2024, usage of VantageScore increased by 55% to hit 42 billion credit scores. More than 3,700 institutions, including nine of the top 10 U.S. banks, use VantageScore credit scores and digital tools to provide consumer credit products or generate greater insights into consumer behavior. The VantageScore 4.0 credit scoring model scores 33 million more people than traditional models. With the FHFA allowing the immediate use of VantageScore 4.0 for Fannie Mae and Freddie Mac guaranteed mortgages, the company is also ushering in a new era for mortgage lending.

VantageScore is an independent joint venture company owned by Equifax, Experian and TransUnion.