#United States #San Francisco #financial inclusion #credit risk #VantageScore 4plus™

VantageScore 4plus™ Pilots Show Remarkable Impact on Credit Access

In a significant advancement for credit scoring models, VantageScore has completed successful pilot programs utilizing its latest technology, VantageScore 4plus™. This initiative integrates alternative open banking data, demonstrating its efficacy in enhancing credit accessibility, particularly for subprime and near-prime consumers.

Overview of the Pilot Programs

Conducted with Patelco Credit Union and Michigan State University Federal Credit Union (MSUFCU), the pilots aimed to evaluate the performance of the new scoring model. Results were promising: 33% of subprime and 41% of near-prime consumers moved to higher credit tiers after introducing open banking data.

The executive vice president and chief data scientist at VantageScore, Dr. Andrada Pacheco, noted, "These results demonstrate that responsibly used open banking data can enhance both risk management and financial inclusion. The most exciting aspect is the tangible impact—allowing lenders to accept more creditworthy consumers."

Features of VantageScore 4plus™

Launched in 2024, VantageScore 4plus™ builds on its predecessors by incorporating real-time bank transaction data to generate FCRA-compliant credit scores. The integration provides better risk separation, particularly beneficial for individuals with sparse credit histories. Notably, the model operates seamlessly with all major credit bureaus, allowing for smooth adoption by lenders without needing to revamp existing credit policies.

Key Findings

The results from both pilot programs were compelling:

• - Michigan State University Federal Credit Union witnessed:

- A 33% increase in subprime consumers elevated to higher credit tiers.
- An impressive 41% of near-prime members also advancing in their credit standings.

• - Patelco Credit Union reported:

- A 12% uptick in subprime members shifting upward in credit tiers.
- A 15% rise for near-prime members.
- An overall 4.8% improvement in predictive power over the previous VantageScore 3.0 in originations.

Blake Johnson, VP of Lending at MSUFCU, stated, “With many of our members being fresh graduates and new to credit, the VantageScore 4plus™ model enables us to confidently extend credit to this demographic, thereby minimizing losses.”

Yazel Pardo from Patelco emphasized the broader implications of the findings: "During a period marked by rising interest rates and financial strain, VantageScore 4plus™ helps furnish a holistic view of consumers' financial behaviors, paving the way for enhanced credit access, especially for new entrants and underserved populations, without amplifying inherent risks."

The Broader Impact of VantageScore

As the fastest-growing credit scoring company in the United States, VantageScore has propelled the usage of its scores by an astounding 55% in 2024, reaching 42 billion credit scores. Over 3,700 institutions, including leading U.S. banks, have adopted VantageScore's innovative models to provide consumer credit solutions and garner deeper insights into user behaviors.

The significant advantage of VantageScore 4.0 lies in its ability to score 33 million additional individuals compared to traditional models. With mandates from the FHFA directing the use of VantageScore 4.0 for guaranteed mortgages through Fannie Mae and Freddie Mac, the company is not only revolutionizing mortgage lending but also aiding in addressing the homeownership gap.

For lenders looking to leverage the transformative power of VantageScore 4plus™, more information is available at VantageScore 4plus site.

Conclusion

The conclusive results from the pilot programs underscore the potential of VantageScore 4plus™ to redefine credit access and risk assessment in a more inclusive manner. As open banking data becomes more prevalent, its integration into credit scoring can bridge the gap for many underserved consumers and enhance financial opportunities for countless borrowers across the country.