The nearly two year old VantageScore 3.0 is gathering more blowback from U.S. consumers. Social media and the creditkarma website, have been overflowing with consumer complaints of credit scores dropping 60-80 points since the introduction of 3.0.
The majority of the negative consumer feedback centers around the gap between the gold standard FICO score and the new VantageScore. Additionally, the score change between VantageScore 2.0 and 3.0, has apparently produced a significantly lower score.
VantageScore Solutions says the new model provides up to 25 percent predictive improvement over earlier models and has the ability to formulate a score for 30 – 35 million previously unscoreable consumers – a group larger than the population of Texas. The scale used in the new model is 300 – 850, a change from earlier VantageScore models.
Extensive testing of the VantageScore 3.0 model shows that its predictive strength well exceeds other credit scoring models across industries and applications, but in particular within the key prime and near- prime consumer populations.
The new scale of 300 – 850 will help facilitate easier model implementation for lenders, and more familiarity for consumers.
As another measure to aid both lender implementation and consumer understanding, VantageScore Solutions reduced the number of reason codes to less than 80, simplified the reason code statements within the VantageScore 3.0 model and wrote them in plain English to aid consumer understanding.
The VantageScore 3.0 model reaches a new milestone by providing a predictive credit score to 30 – 35 million more adults than traditional scoring models.
The model accomplishes this by:
Developing a thirteenth scorecard to generate a predictive credit score for those with little-to- no recent credit activity.
2) Factoring non-tradeline credit data such as collections, public records, and inquiries when active tradeline data is not present.
3) Utilizing tradeline data in consumer credit files that is older than 24 months but remains predictive, an analytic breakthrough and major benefit to infrequent credit users.
4) Using rent, utility and telecom data when it is present in a consumer’s credit file.
The VantageScore 3.0 model improves upon an already strong VantageScore platform used in earlier models. In performance tests against the VantageScore 2.0 model and benchmark models provided by the three national CRCs, the VantageScore 3.0 model demonstrated significant gains in predictiveness. Importantly, the model achieves up to 25 percent predictive improvement among prime and near-prime consumers, which is traditionally where lenders focus lending strategies and is the most sought after group among most mainstream lenders.
Similar double digit results are achieved within the same population for originations in the real estate, auto, and bankcard segments.
Other performance achievements seen with the VantageScore 3.0 model include:
1. Eighty percent of consumer scores are within 20 points across the three national credit reporting companies (CRCs)
2. Nearly identical risk alignment across all three CRCs
3. Maximum predictive performance for both originations and account management scenarios
The key driver of the VantageScore 3.0 model’s improved performance is using more granular data from all three CRCs. The granularity of the data allowed model designers to select 150 of the most predictive characteristics from an estimated 900 behavioral characteristics that were tested.
Among the predictive attributes of this data are:
Detailed mortgage tradelines separating first mortgage from other mortgage related transactions, facilitating greater intelligence with regard to a borrower’s mortgage-related debt.
More distinct definitions of data, such as the ability to identify student loan accounts from other
types of installment accounts.
More specific measurement of delinquency and default timeframes, which provides for an
improved representation of a consumer’s payment behaviors.
Other unique aspects of the VantageScore 3.0 model include the following:
1) Easier to implement
A 300 – 850 score range makes implementation of the VantageScore 3.0 model easier for lenders. Additionally, as with all VantageScore models, the VantageScore 3.0 model is deployed across all three national CRCs, reducing score variance and producing nearly identical risk alignment, leading to added confidence in lending decisions.
2) Built using 45 million anonymous credit files
3) The VantageScore 3.0 model was built using a much larger database of anonymous consumer credit files. Each CRC contributed a database consisting of 15 million anonymous credit files containing more granular data. By building the VantageScore 3.0 model on such a large database, the model delivers a higher level of predictiveness by capturing a larger sample of consumer behaviors and product types.
Also with the launch of the VantageScore 3.0 model, VantageScore Solutions unveiled a new logo, website and branding initiative, which can be viewed http://www.VantageScore.com.
Initially developed by America’s three national credit reporting companies (CRCs) ” Equifax, Experian and TransUnion ” VantageScore Solutions’ highly predictive model uses an innovative, patented and patent-pending scoring methodology to provide lenders and consumers with more consistent credit scores across all three major credit reporting companies and the ability to score more people.
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