At TransUnion, we believe that consumer access to multiple credit scores is key to expanding economic inclusivity. Earlier this year, we looked at how the use of additional credit scoring models in the mortgage market could address unequal lending access among disparate economic and ethnic groups. We also examined the explosion of consumer engagement with a variety of credit scores via direct financial institution relationships, freemium sites and the credit reporting agencies (CRAs), ushering in a new era of consumer credit-savvy and empowerment.
These developments are generating exciting innovations in credit scoring, with the potential to help more individuals and families gain access to capital and improve their standards of living. One of the more promising movements is the incorporation of trended data into credit scores. Trended data, also known as historical or time-series data, illustrates more than a view of consumer debt at a single point in time. By using trended credit data, lenders can incorporate up to 30 months of account history on loans and credit accounts, exposing patterns that can help them make better-informed decisions.
For example, the VantageScore 4.0 credit score leverages historical credit data like changes in balances and actual payment amounts. This information allows lenders to see, for example, whether a consumer is paying off credit cards each month or carrying a balance — and whether that monthly balance is trending downward or upward. VantageScore 4.0 credit score also offers solutions to three specific challenges that traditional models present to lenders and consumers alike:
Challenge #1: Consumers who are new to credit or have limited credit histories are often outside the reach of conventional scoring models, resulting in lost opportunity for businesses and individuals.
Solution: Using trended data, VantageScore 4.0 enables lenders to uncover risk value hidden in plain sight, providing the confidence necessary to offer financial products and services to an expanded universe of credit-worthy consumers. In turn, more than 30 million additional consumers gain access to relevant financial products and services that can help them improve their quality of life.
Challenge #2: Traditional credit scoring models can be fairly inconsistent as they are requested through one CRA versus another. This can be confusing for consumers, and depending upon the chosen score, may exclude them from certain credit opportunities.
Solution: VantageScore 4.0 is the first and only credit scoring model with trended data leveled across all three of the major CRAs, offering a consistency that other scores lack. Better alignment in consumer credit scoring allows for more confident lender and consumer decision making.
Challenge #3: Enhancing predictive scoring model performance without creating additional business and market risk.
Solution: VantageScore 4.0 delivers solid predictive risk performance across consumer credit products, including a respective 16.6% and 12.5% performance lift* in bankcard and auto credit lines. The ability to assess default potential more concretely, while opening doors of opportunity to more consumers, is an economic win for all.
As the fourth-generation credit scoring model from VantageScore Solutions, VantageScore 4.0 offers innovation and benefits that serve 21st Century lender and consumer needs. The model is another example of TransUnion’s investment in, and commitment to, the use of Information for GoodSM to help consumers gain more access to credit, control their financial lives and improve their standard of living.
* As compared with VantageScore 3.0