Launched in 2006 by the nation's three major credit reporting companies (CRCs), the VantageScore® credit scoring model is a pioneering and innovative credit scoring model proven to be highly predictive of credit quality ― providing credit unions with a consistent interpretation of consumer credit files across the three CRCs and the ability to score more people more accurately. This means credit unions can identify and extend credit to more creditworthy borrowers, including the millions of Americans who use credit infrequently, and those who are new to the credit market.
Numerous credit union lenders
have implemented the VantageScore credit scoring model into their risk
management and underwriting processes. In addition to improved accuracy, consistency
and an expanded pool of credit worthy borrowers, credit unions are switching to
VantageScore because its second version, VantageScore 2.0, was built using a
deeper sample size of credit files.
VantageScore 2.0 was built
starting with 45 million credit files, submitted equally by the three national
credit reporting companies. The sample size is taken from recent, multiple
timeframes, that includes a period of unprecedented credit availability prior
to the recession, and the extreme volatility that ensued. By using such a large
sample of data from multiple timeframes, VantageScore 2.0 is able to capture
market conditions and have enough evidence to weight behaviors such that the
algorithm remains predictive in volatile and normalized economic conditions.
Logically, lenders also
appreciate that the VantageScore approach enables the model to be more stable
for longer periods of time. This allows lenders to use the VantageScore credit
scoring model longer, as the natural deterioration that all credit scoring
models inevitably experience is delayed. In other words, VantageScore has
proven to be accurate for longer periods of time.
In conjunction with lender
adoption, the VantageScore model has achieved significant awareness with
federal regulators, including the Treasury Department, Federal Reserve, Federal Housing Administration (FHA),
Federal Housing Finance Agency (FHFA) and National Credit Union Administration (NCUA). Read more about VantageScore in the news.
By using the VantageScore credit
scoring model in a manual or automated environment, in conjunction with other
underwriting criteria, credit unions are assisted with lending decisions and
- Reduce the time to review the application
manually by setting a cut-off score strategy
- Use the score for tiered offers with multiple
cut-off strategies; for example, extend the most favorable offer to your most
creditworthy members and appropriately adjusted offers for those members that
are in the middle segment of credit risk and those that are more credit risky
- Set one cut-off to request a deposit for
deposit/no deposit (pass/fail) strategies or determine whether a member would
fall into a risk category that is unfavorable for your business need
- Use VantageScore in conjunction with custom
application and bankruptcy scores for more accurate decisions when acquiring
- Use VantageScore with a custom behavior score to
determine appropriate cross-sell, activation and re-pricing decisions for
account management purposes
The following are key breakthroughs that have
encouraged credit unions to use VantageScore credit scoring model in their
NAFCU Member-only Benefits
VantageScore credit scoring model makes available free research findings and education to help credit unions more effectively use credit scoring.