VantageScore, Experian Launch New Credit Initiatives
Written By: Joel Palmer, Op-Ed Writer
VantageScore and Experian have announced new tools this month aimed at helping mortgage processors and underwriters.
VantageScore is ready to pilot a new credit-scoring model, called VantageScore 4plus. The company said the new model “combines the power of alternative open banking data with traditional credit data,” which will result in a 10 percent predictive lift over its current VantageScore 4.0. VantageScore said that 4.0 offers an 8 percent predictive lift over conventional scoring models.
VantageScore 4.0 was approved by the Federal Housing Finance Agency (FHFA) in October 2022.
“At a time when delinquencies are reaching the highest levels we have seen in recent history, the need for a credit score that gives deeper insights into a member’s ability to pay back is critical,” said Yazel Pardo, Head of Credit Risk at Patelco Credit Union, in VantageScore’s announcement. “Through our testing of VantageScore 4plus, we’ve seen its ability to more accurately represent a consumer’s creditworthiness, helping Patelco increase its ability to lend to more members during these uncertain economic times.”
VantageScore is looking for more lenders to pilot the new score. The company said 4plus is compatible with all major aggregator APIs and works for any credit report from Experian, Equifax or TransUnion. It uses the same scoring range as VantageScore 4.0 (300 to 850) and also has aligned score-to-odds ratios.
“As a result, most lenders will not need to adjust their credit/lending policies to use the new VantageScore 4plus credit score,” the company said.
In addition to its advanced predictive power, VantageScore said the new model is also more inclusive because consumers can share a more complete view of their finances. It uses consumer-permissioned data to ensure real-time data, which minimizes fraud, the company said.
In another development credit reporting agency Experian launched an open banking solution that it says will expand access to credit to underserved borrowers.
The company recently launched Cashflow Attributes, which it says will help “expand fair and affordable access to credit, particularly for thin-file and credit invisible consumers” by using over 900 income, cashflow and affordability attributes.
Cashflow Attributes leverages a potential borrower’s checking and savings account information, which the company said “offers a more comprehensive view of an individual’s financial profile.” Experian said its research shows 71 percent of consumers are willing to share their banking information if it increases their chances of credit approval.
“We believe banking information holds untapped potential and that our new Cashflow Attributes represent an exciting step forward that can easily be integrated into lending decisions,” said Scott Brown, group president Experian Financial and Marketing Services. “As we look ahead, we will continue to leverage our core credit data, new data elements and our analytics expertise to unlock new opportunities for both consumers and businesses.”
Lenders requesting Cashflow Attributes provide Experian with depersonalized transaction information from their existing customers or with consumer-permissioned account information from other banks.
Experian will analyze and categorize the information using its proprietary categorization model. In seconds, Experian delivers the transaction categories and predictive attributes back to the lender.
These new initiatives come as FHFA is in the midst of replacing the Classic FICO credit score with FICO 10T and VantageScore 4.0. The transition to the new models also includes changing the requirement for three credit reports to only two credit reports for single-family loan acquisitions by Fannie Mae and Freddie Mac.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
