A busy month for VantageScore

Dear Colleague:

With the summer behind us, it’s time to jump into fall. There’s so much happening on the VantageScore home front, but we would be remiss if we did not acknowledge and extend our heartfelt support to the victims of hurricanes Harvey, Irma and Maria. On a personal level, this has hit our own VantageScore (extended) family, and we hope that those you may know who also have been impacted are on their way to recovery.

On a related note, take a look at our article “Credit Reporting and Natural Disasters,” which explains how credit scores don’t necessarily have to be adversely impacted if victims of natural disasters must ramp skip payments. As we’ve seen in the news, parts of our country are facing unlivable devastation right now. VantageScore 3.0 and 4.0 take into account these unfortunate circumstances. Read the article to find out how.

The rest of our newsletter is eclectic in topic. For example, any parents out there will likely want to read about Experian’s latest study on student loan debt. Scary but true, student debt has now risen to $1.4 trillion (that’s trillion with a “tr” in case you missed it).  Experian’s research shows how much debt students acquire, the percentage of late payment on their loans and, of course, the average VantageScore credit score of students with loans. This data was sliced and diced to include both generational and regional insights. Make sure to see how the student in your life measures up.

To appeal to our structured finance friends, the latest Default Risk Index quarterly results are in. As you’ll read, the mortgage and auto lenders took on slightly more risk in the first quarter of this year. Total originations volume also declined. Check out the new data for yourself.

Finally, I told you we’ve been busy, right? Well, that’s because next month VantageScore 4.0 will be commercially available to lenders, and in the following months we also will be releasing a number of white papers to share more insights on our latest model. What’s more, we’re taking all of this good news with us on the conference circuit. Below is a list of places where you can find us this fall.

Hope to see our paths cross this conference season.



AREAA National Convention (9/28-30, San Diego)

American Banker Most Powerful Women in Banking and Finance (10/5, New York)

Banking AI Conference (10/16-17, Boston)

MBA Annual Convention (10/22-25, Denver)

CardCon + FinCon (10/25-28, Dallas)

SFIG Residential Mortgage Finance Symposium (11/7, New York City)

NCRA’s 25th Anniversary (11/6-9, Baltimore)

Housing America’s Families (11/15, Detroit)

Consumer Bankers Association webinar: VS4 (11/29, Online)

MBA Diversity & Inclusion Conference (12/4-5, DC)

Did You Know:
Credit Reporting and Natural Disasters

By John Ulzheimer

I’m sure those who are dealing with Hurricanes Harvey, Irma and Maria have a million other things to worry about besides their credit reports and credit scores. But when storm victims, their family members and the relief workers get some normalcy back in their lives and refocus on their finances, there will be some things they will want to understand regarding credit reporting. There are, in fact, credit reporting standards and guidance from the credit reporting industry, which specifically address natural and other “declared” disasters.

Lenders and other data furnishers provide information to the three national credit reporting companies (Equifax, Experian and TransUnion) using an industry standard format called Metro 2. And these data furnishers are instructed on how to properly report under the Metro 2 format via the Credit Reporting Resource Guide or, as it is referred to more informally, the Metro 2 manual. It’s important to have a basic understanding of the Metro 2 manual because it addresses how natural disaster credit reporting is to be handled.

When reporting to the credit reporting companies, lenders can add a code to their accounts or “trade lines” which indicates that their customers or borrowers have been “Affected by natural or declared disaster.” If a lender uses this code, formally referred to as a Special Comment Code, the notification about a disaster will appear alongside the trade line for the customer’s account. It’s incumbent on the lender to insert the code initially and to remove the code after the event.

Lenders should connect with their credit bureau representative to understand how to report natural disaster codes on their customers’ accounts.

Are My Credit Scores Impacted?

The VantageScore 3.0 and 4.0 models are actually different than other credit scoring models because they allow for special treatment of victims of a natural disaster. With other conventional models, consumers’ accounts that are reported with the natural disaster reporting code may not be counted in the calculation of a credit score. As a result, both positive and negative information is potentially invisible to a consumer’s credit score and some consumers’ scores actually may decline because they are not getting credit for the positive information associated with the coded accounts.

With the VantageScore 3.0 and 4.0 models, only payment history information that would negatively impact a consumer’s credit score is “set to neutral” so consumers are not impacted if they are not able to pay their bills during this time.

Disclaimer: The views and opinions expressed in this article are those of the author John Ulzheimer and do not necessarily reflect the official policy or position of VantageScore Solutions, LLC.

The State of Student Loan Debt

For those who just graduated college, the end of the summer after graduation often marks a time to really buckle down and find a job. And that first job out of school is important, now more than ever, given the tremendous increase in the amount of student loan debt in this country. Experian conducted a cross-generational and regional study on student loans and found that, overall, outstanding loan balances have increased over 149 percent (in total balances) since 2007. Some of the other highlights from the study are below.

Key findings:

  • The average total student loan balance is $34,144.
  • The average VantageScore credit score for consumers with one or more student loans is 650, or 25 points lower than the national average of 675.
  • Students are taking out multiple student loans to fund their education, with the average number of student loans now at 3.7 per person (up from 2.4 in 2007).

Generational findings:

  • Generation X (ages 35-49) has the largest average outstanding loan balance — $39,802.
  • Generation Y (ages 21-34) has the largest number of loans — 4.4 per person.
  • Generation Z (ages 18-20) has the highest percentage of loans currently in deferment — 77 percent.

Regional Findings:

The study found that consumers on the East Coast tend to have higher student loan balances. See the chart below for a more detailed breakdown:

Average student loan balances by metropolitan statistical area (MSA)


Metropolitan Statistical Area
(in thousands)

Gainsville, FL
Washington, DC
Charlottesville, VA
Atlanta, GA
San Francisco, CA



Metropolitan Statistical Area
(in thousands)

Sioux, IA
Laredo, TX
North Platte, NE
Harlington, TX
Glendive, MT

As a participant in the consumer credit scoring industry, it is, however, promising to hear that the percentage of late payments has dropped 10.1 percent from 9.9 percent in 2009. For parents who would like to share some words of wisdom to their graduates on how to improve their credit score, please visit:

An interesting infographic on the Experian study can be found here:

Default Risk Index Update: 1st Quarter 2017

The VantageScore Default Risk Index has now been updated to include the results for the first quarter of 2017. The VantageScore Default Risk Index tracks the amount of default risk assumed by lenders in four U.S. consumer-loan categories: mortgage, bankcard, auto loan and student loan.

The first quarter of 2017 yielded fairly similar default risk results as compared with those at the end of last year; however, auto and mortgage lenders took slightly more risk. On originations volume, the risk profile of new auto loans increased from 89.3 in the fourth quarter of 2016 to 99.5 in the first quarter of 2017. This level represented the highest risk profile since the first quarter of 2016.

For more trend insights and details on the latest VantageScore Default Risk Index results, please visit:

Five Questions with Mike Fratantoni, Ph.D.

Mike Fratantoni, Ph.D., is the chief economist and senior vice president of research and industry technology at the Mortgage Bankers Association.Sept 2017

1) Back in April, MBA introduced its GSE reform proposal. How has the response been now that you and your colleagues have had a few months to socialize the proposal?

The conversation really has moved in the direction of MBA’s proposal to have the GSEs re-chartered as participants in a competitive, multiple-Guarantor model, with the Guarantors having access to an explicit guarantee for the mortgage-backed securities they issue. In my discussions with leaders in housing finance, the central tenets of MBA’s proposal are the benchmark right now.

2) For the MBA Risk Management, Quality Assurance & Fraud Prevention program, you spoke in a session with Fannie Mae and Freddie Mac regarding changes taking place in underwriting and QC practices. Can you provide some initial thoughts on the topic?

One of the highlights of the conference every year is when representatives from the GSEs give updates on their QC and risk-policy parameters. They’ve made a number of changes with respect to underwriting criteria, appraisals and property valuation. They are continuing to work to reduce the time and cost burden for lenders.


3) Mortgage rates seem to be falling this summer, a season that some consider a busy time for the mortgage industry. Has this made an impact on mortgage volume, and what are your predictions for rate increases/decreases the remainder of the year?

Rates have come down a bit, but overall the pace of originations is meeting our forecast of $1.6 trillion of mortgage originations, with a 40 percent decrease in refinance activity and roughly a 10 percent increase in purchase volume. We expect rates to drift higher this year and into next, with one more rate increase by the Fed this year.

4) Why are we seeing an increase in cost to produce a mortgage these days, and what can the industry do to minimize the cost?

We’ve seen origination costs almost double in the past 10 years due to lenders increasing staffing for back-office operations: largely staff for QC, QA, risk management, compliance and legal roles. In the industry, we call this “checkers checking checkers.” To reverse this trend, lenders would need to feel more confident that they are operating in a safe and compliant manner. For that to happen, our industry needs more regulatory clarity.

5) Everyone wants to tap into the millennial market. What are your thoughts on how we can convince this more risk-averse generation to take the leap into home ownership?

Millennials have achieved many of the standard mileposts in life later than previous generations: buying a car, getting married, having kids and buying their first house. But in the last year or two we’ve seen the pace of millennial purchases increase. A strong job market and the greater availability of low-down-payment programs has facilitated this trend.

Valued partners:
VantageScore Licensees:
Equifax Experian TransUnion