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STAMFORD, Conn, March 11, 2013 – VantageScore Solutions, the company behind the VantageScore® credit scoring model, announced today (actually it was yesterday) the unveiling of its newly constructed credit scoring model, VantageScore 3.0. The new model provides up to 25 percent predictive improvement over earlier models and has the ability to formulate a score for 27 – 30 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.
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.
HOW THE VANTAGESCORE 3.0 MODEL SCORES MILLIONS MORE CREDITWORTHY ADULTS – The VantageScore 3.0 model reaches a new milestone by providing a predictive credit score to 27 – 30 million more adults than traditional scoring models.
The model accomplishes this by:
1) 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.
OTHER KEY FEATURES AND TRENDSETTING CHANGES RELATED TO THE LAUNCH OF THE VANTAGESCORE 3.0 MODEL -
The launch of the VantageScore 3.0 model represents a major analytic breakthrough for the credit scoring market as well as a major shift from “business as usual” among credit score developers. 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 – 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.
3) Data sample from blended timeframes – The data sample used to build the VantageScore 3.0 model was developed on consumer behavior from two different two-year timeframes: 2009-2011 and 2010-2012. Each performance timeframe contributed 50 percent of the model’s development. Developing the VantageScore 3.0 model over the extended window reduces the model’s sensitivity to consumer behavioral shifts over different volatile periods.
4) Exclusion of paid collections accounts – Through the combination of the model’s innovative design and by leveraging more granular consumer credit data, VantageScore 3.0 is able to exclude paid collection accounts without sacrificing predictiveness.
5) Special treatment for victims of a natural disaster – Lenders have long had the ability to indicate accounts belonging to natural disaster victims when reporting account activity to the CRCs. When accounts are reported with the natural disaster reporting code, the account is not counted in the calculation of a credit score. This has meant that both positive and negative information is potentially invisible to a consumer’s credit score. With the VantageScore 3.0 model, only information that would negatively impact a consumer’s credit score is “set to neutral” so that consumers can continue to benefit from information that would have a positive impact in the event they are victims of a natural disaster.
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Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, founder of www.creditexpertwitness.com and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. You can follow John on Twitter here.