Credit scores play a critical role in pricing too.

Well, that went by quickly! With just a few more events to go, the fall blitz of conferences and speaking engagements is coming to a close. I want to thank the members of the VantageScore team and all of our partners and colleagues for the hard work that goes into each and every one of these opportunities.

Last month, my column challenged the notion that competition in the mortgage market among credit score model developers would lead to a “race to the bottom.” It triggered a lot of feedback endorsing the continuing education of how the credit scoring process works. Please keep the feedback loop going.

In fact, I believe credit scoring competition is a race to the top. That is because in our business lenders provide the ultimate quality control. And that is because before they implement a new scoring model they perform their own extensive testing: How predictive is the new model on their own portfolio or within subsets of it? How did it perform over time? Had they used it, how many more good loans could have been made or bad ones avoided? If short cuts were taken in developing new models, that independent testing would discover such shortcomings quickly.

This month I thought I’d touch on another topic that also relates to the argument in favor of breaking FICO’s exclusive franchise in the government-sponsored mortgage market: that loan approvals and getting through the proverbial door are only part of the way credit scores are used.

Credit scores also play a critical role in pricing. The price that a consumer pays for a loan that will be purchased by one of the GSEs is determined by a matrix. In Fannie Mae’s case, this is called the Loan-Level Pricing Adjustment (LLPA), which can be viewed here.

On one side of the matrix is the applicant’s credit score. The model which is required for use in this matrix is an outdated version of the FICO Score built prior to the recession using data samples from 1995 to 2000. On the other side of the matrix is the potential borrower’s “loan-to-value” (LTV), which represents the size of the borrower’s down payment relative to the total amount of the loan. 

It’s often stated that credit scores are hardly, if at all, used in mortgage underwriting. While underwriting takes into account the entirety of an application, however, the credit score is one of only two factors that determine pricing. For borrowers without a credit score, the price they pay assumes the worst (which could be one factor explaining the paucity of loans to borrowers without credit scores).  

We’ve written before about how newer models, like VantageScore 3.0 and VantageScore 4.0, could help improve access at the margins. This argument is based on the opportunity to expand the pool of applicants who pass that first bar of having a 620 score or better. Equally important, however, is the opportunity to price based on the latest, most predictive tools. This could have the dual benefit of pricing in some borrowers on the bubble and extending a fairer price—that is, a price that most accurately reflects their riskiness—to every borrower who takes out a mortgage.  

We look forward to continuing our work with the various stakeholders to solve this challenge for the benefit of consumers and lenders.

Speaking of looking forward, I’d like to wish you all a happy and healthy holiday season.


Barrett Burns

Trended Credit Data:
Credit behavior over time reveals new patterns.

Much has been said lately about the use of trended credit data in the credit scoring industry. Indeed, its value has been shown and our latest white paper, “Trended Credit Data Attributes in VantageScore 4.0,” can tell you the reasons why. With a detailed explanation and specific examples of trended credit data, this white paper helps define the need for and the importance of trended credit data to the credit scoring industry as well as for use in the newest VantageScore model: VantageScore 4.0.

The white paper highlights:

How Trended Credit Data Benefits Lenders and Consumers

  • When supplemented with traditional, static credit data, trended credit data has been shown to provide up to 20 percent lift in incremental predictive performance among Prime and Superprime consumers (compared to the use of only static data attributes).
  • Trended credit data may be used to determine patterns in credit behavior history, such as trends in balance increases or decreases, the frequency of payments made above the minimum agreed amount due, and the number of times a consumer is over his/her revolving credit limit.  Use of those attributes is especially valuable in improving the predictive performance of VantageScore 4.0 for Prime and Superprime consumers, for purposes of both new originations and existing accounts.
  • While 58 percent of Americans carry revolving credit card debt from month to month, trended credit data allows lenders to better assess the risk presented by those consumers who are paying down their outstanding balances, information that is unavailable if a score merely analyzes a consumer’s balance “snapshot” from the prior month.

How VantageScore Paves the Way for Greater Usage of Trended Credit Data

  • VantageScore is the first and only tri-bureau model to incorporate trended credit data from all three national credit reporting companies (CRCs) — Equifax, Experian and TransUnion.
  • Because of VantageScore’s patented leveling process, VantageScore 4.0 is the only model that is identical at each CRC, ensuring that the trended attributes are consistent across all three CRCs.
  • Trended credit data attributes derive from the same credit fields that the CRCs have provided for decades (i.e., loan amounts, credit limits, balances, minimum payments due and scheduled payments).

VantageScore 4.0 is scheduled to be available for commercial use from all three CRCs this fall.

To download the white paper for more details on the study, visit

CBA Webinar:
A closer look at trended credit data, machine learning and the removal of public records.

This fall, we’ve been excited to share details about VantageScore 4.0, our latest credit scoring model, to scores of guests on the conference circuit. If you haven’t been able to catch us live, we are conducting the webinar “Scoring More Consumers with Greater Accuracy” with Consumer Bankers Association (CBA) on Wednesday, November 29 at 2 p.m. EST.

Our own Sarah Davies, senior vice president of analytics, research, and product development, will present the latest advancements in the credit scoring industry, including:

  1. How “trended credit data” — including such attributes as balance and utilization changes over time — impacts credit score performance and enhances decision-making within key consumer populations;
  2. how “machine learning” helps developers of advanced credit scoring models uncover new data relationships and unlock greater predictive insights, particularly for those with sparse credit histories; and
  3. how changes in the CRCs’ handling of public records and collections data under the National Consumer Assistance Plan (NCAP) could affect consumer scores and scoring models, and how VantageScore 4.0 accounts for these changes.

To register for the webinar, sign up here. If you are not a CBA member, you can view this webinar FREE using our discount code: VS1129.

House hunting and credit:
What you need to know

By now it’s something of a cliché to call home ownership the American dream. But even if sitting on your own deck, looking over your picket fence, and sipping lemonade doesn’t move you, home ownership still remains one of the best ways to build wealth. For many, owning a home is cheaper than renting. It may also be the biggest investment you will ever make. Thus, it’s both a dream and a practical financial move.

So while it’s perfectly fine to dream about the Carrera marble you want in your bathroom or the pergola over the patio, the path to owning your own home involves taking the time to do some financial sightseeing.

As a leader in creating credit scoring models, VantageScore Solutions has made it a priority to educate consumers on the important role that credit plays in buying a home.

Whether you’re about to set out to buy your first home or if you’re getting ready to sell and buy another home, here are the basics of how credit impacts the home-buying process.


If you’re like most people, you’ll probably need to take out a loan. If you don’t, and you’re all set to pay cash for your home, count yourself among the lucky few!

A huge part of taking out a loan involves your credit score. Basically, you must prove to lenders that you can be a responsible borrower and can be trusted with a mortgage of tens of thousands of dollars. A credit score is proof of this trustworthiness.

Different kinds of loans have different credit requirements. Some loans require you to have a credit score of at least 620, although it is possible (with some difficulty) to obtain loan approval with a credit score in the range of 500 to 579.

But getting approved is only part of the story.

Better credit, better rate

Home loans come in all shapes and sizes. Some are fixed, some have adjustable rates, lower interest rates, longer terms, and the list of options goes on. Just like anything else, some loans are better for you than others. A good credit score is likely required if you want to get a loan with the lowest interest rate.

The reason is that a higher credit score shows lenders that you are better at managing debt and have a history of responsibly repaying loans. As a result, the lender takes on less risk when lending you money. The smaller the risk for them, the better the interest rate for you.

Your credit score can also determine how much of a down payment you will need to make.

While there are clearly more nuances to the process, your credit score plays an instrumental role in determining the type of loan you qualify for. Therefore, before you go to your first open house, check your credit score.

VantageScore Solutions provides an accurate, easy-to-understand credit report that is becoming an industry standard. Knowing your credit score will help you plan, budget, and come up with a realistic wish list for your new house.

Did You Know:
Opening new retail store credit cards can lower your score.

By John Ulzheimer

As Black Friday, Cyber Monday, and the rest of the holiday shopping season quickly approaching, many of us will be making a trip (or eight) to the local shopping malls. And while we are shopping, we will be tempted with discounts, some as high as 20%, of our purchases if we are willing to apply for and open a new retail store credit card. And while saving money is always nice, it’s important to understand the impact of applying for one or more retail store credit cards in a short period of time.

In fact, everything you’re about to read applies equally to the other 48 weeks of the year that don’t normally coincide with the busiest shopping season. We just seem to lose some of our budgetary controls, which is why saving some amount off your holiday shopping can be so appealing. It all starts with applying for a new retail store credit card.

When you apply for credit, the card issuer will likely pull at least one of your credit reports and credit scores. They will use this information to determine if you meet their eligibility requirements. When they pull your report, a retail store credit inquiry will be placed on your credit report.

If your credit card account is approved, then within a few weeks the account will be reported to one, two or, most likely, all three of the credit reporting companies. When the newly opened card is added to your credit report, it will lower the average age of your accounts because it’s fresh activity.

It’s important to keep in mind that new inquiries and a lower average age of accounts can lower your credit scores. This certainly doesn’t mean you should avoid applying for new accounts over the holiday season, especially if it’s going to save you a bundle of cash. But you should be aware that it has the potential to lower your credit scores.

Of course, for consumers who have extremely strong scores in the mid-700s and above, opening a few new accounts will be much less problematic. For example, if opening a new retail store account lowers your score from 780 to 770, that 10-point decline is basically meaningless because your score remains excellent.

The real issue arises for consumers who already have marginal credit scores. Lenders are less likely to offer the best deals to consumers with scores below 700. A 10-point decline may put a consumer into that category, with substantial and undesirable consequences.

Another consideration is that these retail cards typically offer lower initial credit limits than do bank or credit union-issued credit cards. That means when you charge merchandise to that particular card, the utilization rate (i.e., the balance amount as compared to the credit limit), may be much higher than a bank or credit union credit card. A higher utilization rate could also cause a decline in your credit score.

These issues hold true whether you open new retail credit cards on Black Friday, in May, or at any other time of the year. The prudent thing to do is to pay attention to these issues, especially if you are planning to apply for a new loan in the near future.

Rather than guessing about the possible impact of newly opened accounts, you can find out for certain what your credits scores are now, and what they would be after you opened such retail accounts. There are a variety of websites that will allow you free access to your VantageScore credit scores. You can find a comprehensive list of them here

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.

5 Questions with Doug Lebda, CEO & Founder, Lending Tree

In 1996, Doug Lebda founded LendingTree, which revolutionized how consumers shop for loans and how lenders reach new customers.Sept 2017

After launching nationally in July 1998, Doug led LendingTree through a successful IPO in 2000, through the dot-com meltdown of 2001, and to a successful sale to IAC/InterActiveCorp in 2003.

From 2005 to 2008, Doug served as IAC’s president and chief operating officer, and in 2008, joined the newly formed (now rebranded as LendingTree) as it spun out from IAC as a separate public company.

Before founding LendingTree, Doug worked as an auditor and consultant for PriceWaterhouseCoopers after receiving his bachelor’s degree from Bucknell University.

Mortgage origination is currently undergoing what many consider to be a long-overdue digitally focused overhaul. As closing speeds increase, what should consumers be thinking about to ensure they still get the best deal?

The key is for consumers to shop around since rates can vary by over 100 basis points from lender to lender. On average, we see about a 40 basis-point spread between the lowest and highest offer consumers receive from lenders on the network. That translates to over $20,000 in savings over the life of the loan on a 30-year fixed-rate mortgage by selecting the lowest offer.

What is LendingTree’s “Startup Innovation Spotlight” and does LendingTree still maintain some of that “start-up mentality” that helped the company successfully launch back in 1996?

LendingTree is committed to supporting and advancing technology in financial services and within the fintech community. The Innovation Spotlight is our way of showing that support and giving promising businesses a boost to affect change and make an impact. As for our start-up mentality, we still have it. We may be a public company, but we’re a start-up at heart. Our team is highly entrepreneurial, as are our core principles, which focus on empowerment.

LendingTree has successfully gone through a number of significant cycles, including the tech bubble and its subsequent bursting, as well as the more recent housing finance crisis. How was the company, which is seemingly positioned in the center of both cycles, able to survive and thrive?

We’ve had to pivot and adapt, making tough but crucial decisions along the way. One primary driver is the diversification of the business. LendingTree had been historically mortgage-focused, but over the past few years, we’ve been able to successfully grow and expand into new categories — while also growing the mortgage business. Revenue from LendingTree’s non-mortgage products now represents 57% of total revenue (as of Q3 2017), compared to 43% just one year ago.

LendingTree uniquely allows consumers to shop for mortgage loans and other products like credit cards. Are there differences in the way that consumers shop for these two types of products?

There are, of course, differences given that a mortgage is one of the largest financial transactions in a person’s life. But, LendingTree is focused on helping consumers find the right products for their financial situation using data from their credit profile and from our partners, regardless of the product category.

LendingTree has been offering users free VantageScore credit scores for over a year now. How have consumers responded and what areas of credit scoring and reporting do they have the most questions about?

VantageScore has been incredibly valuable to consumers, enabling people to gauge their apparent creditworthiness when shopping for loans and other financial products. Consumers are interested in what factors impact their personal VantageScores and how they can improve those scores — especially since credit decisions and pricing are fairly dependent on one’s credit score. The biggest questions we see relate to how consumers can improve their score and how lenders use credit scores to base credit decisions.

Valued partners:
VantageScore Licensees:
Equifax Experian TransUnion