New VantageScore® Data Tool Enables Accurate Measurement of Credit Risk Over Time
Risk report powered by VantageScore™ Quantifies the relationship between VantageScore credit ratings and default risk
SAN FRANCISCO, September 15, 2022 /PRNewswire/ — A common misconception about credit ratings is that the risk associated with a particular rating is static. In reality, the risk associated with a score changes over time due to a variety of factors, including macroeconomic changes and how consumers manage various types of credit products.
The dynamic relationship between VantageScore credit scores and default risk is particularly critical.
The dynamic relationship between VantageScore credit ratings and default risk is particularly critical for industry stakeholders to understand in the current economic environment where consumers are facing inflation, a potential prolonged recession and other possible economic challenges.
To address this need, VantageScore has launched a first-of-its-kind tool called RiskRatio that offers lenders and financial market participants the ability to visualize and update the relationship between credit scores and default rates (measured by late payment of 90 days or more within a 24 month period) at different points in time for creations as well as for existing accounts.
“The launch of RiskRatio builds on VantageScore’s long history of demonstrating and promoting transparency and helping the governance model,” said Silvio Tavares, President and CEO of VantageScore. “For users of our credit ratings, which include more than 3,000 companies, including nine of the top 10 banks and many of the largest institutional investors, RiskRatio provides the ability to understand how ratings relate to portfolio risk and to the economic environment.
As an example, using the tool, stakeholders can see that consumers in the near-premium 621-640 credit score band had a 55% decrease in default risk when comparing l population sample of March 2009 (period of stress) to March 2020 over the 24-month performance window of each period. This information provides stakeholders with important information to help them manage their portfolio risk.
Other key features of the tool include:
TRANSPARENCY: Provides clear insights into the predictive performance of VantageScore credit scores over time for new sign-ups and existing accounts.
RELEVANCE: Conveys an understanding of default rates corresponding to each score band by credit product not previously available.
EASY ACCESS: Is a publicly available tool that stakeholders can use to review data and gain valuable insights at no cost and without providing personal information.
For more information visit: https://vantagescore.com/lenders/risk-ratio/
About VantageScore Solutions
VantageScore Solutions develops consumer credit scoring models that combine the need for financial inclusiveness and reliable predictivity across all scoring ranges. Known as an industry thought leader, the company’s newest models score approximately 96% of all adults 18+ – including 37 million more people than conventional models – without sacrificing safety and solidity. As a result, lenders using VantageScore can extend credit to those who have been historically marginalized, including minority and low-to-middle income Americans. VantageScore credit scores are used by thousands of lenders, landlords, utility companies, telecommunications companies and more to determine creditworthiness. Additionally, tens of millions of consumers rely on free access to their VantageScore credit scores to monitor their own creditworthiness.
VantageScore Solutions was launched in 2006 and is owned by the three US National Credit Reporting Societies (CRCs) – Equifax, Experian and TransUnion. Using a patent-protected tri-bureau methodology, VantageScore provides proven, innovative, and more consistent credit scoring models across all three CRCs.
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