FICO vs FAKO? Here Are the Facts.

 Dear Colleague:

It’s customary to ring in the New Year with forward-looking goals, aspirations and resolutions. We, at VantageScore, are perpetually moving forward but based on some recent comments from our esteemed competitor, I’m not sure they share the same focus.

I’m speaking of comments that the CEO of FICO made to the Financial Times where he accuses two very large financial services companies of giving “FAKO” scores to consumers.

Whether you look at his statements from a competitive standpoint or from an industry standpoint, they lack justification and come from a bygone era.

Here’s what I mean by that:

From a competitive standpoint, VantageScore has made serious inroads however you slice it. The one exception, of course, is that we remain barred from use by the GSEs. Setting that aside, our models are now used by lenders of all shapes and sizes for all of the same purposes as FICO, however you slice it. 

To wit, I am pleased to share with you more information that drives home this point. Every year the credit reporting companies (CRCs), who compete with each other to sell VantageScore credit scores to market participants, are surveyed in order to understand how our market adoption is trending.

To add an extra layer of credibility, this year a highly respected third party firm, Oliver Wyman, a global leader in management consulting and research, was hired to dig into the numbers. Here are some key takeaways from their report:

  • Of the more than 8.5 billion credit scores used, approximately 75% (or more than 6 billion) were used by lenders, confirming VantageScore credit scores are being used across the entire lifecycle of consumer lending and almost every relevant industry category.
  • There are more than 2,700 unique users of VantageScore credit scores. Of those unique users, more than 2,200 were financial institutions.
  • Credit card issuers used approximately 4.9 billion of the total number of VantageScore credit scores, with the 10 largest card issuers accounting for approximately 83% of this volume. 

FAKO score? I think not.

And, here’s what I mean when I say that the FAKO commentary doesn’t make sense from an “industry standpoint.” Well-articulated by my colleague Mike Trapanese in a LinkedIn post, he states that (I’ve underlined the key message):

This is like Kleenex calling Puffs a fake tissue brand. Disappointing to see a good CEO resort to playground tactics.

FICO is peddling a fantasy in its battle to build a consumer brand. There is no single, golden key to credit. There is no universal standard that all lenders use: they look at a mix of information and so should consumers. Both Capital One and Chase provide free tools to put each consumer’s credit score in context and explain what it says about his or her credit history. That context is the most important part, and for FICO to suggest otherwise is self-serving and, frankly, wrong.

Lansing suggests, “We think there is room for confusion.” Apparently, FICO intends to exploit it.

The Oliver Wyman study also notes: “Many lenders pull multiple credit scores to underwrite each new loan, and therefore it is impossible to extrapolate market share for VantageScore specifically.” That being the case, I submit that it is also impossible for any score provider to provide reliable market share statistics. The point is that: No one can possibly know the denominator of such a calculation or, said another way, no one knows how many credit scores are used in total and thus any claims about a specific percentage of market share are questionable at best.

Plenty more about our market adoption is included in another article in this month’s newsletter, along with another view on the FICO/FAKO debate from credit score expert John Ulzheimer. We also have a terrific piece on how our new model leverages machine learning in order to score those with limited credit histories more accurately, and an update of our Default Risk Index. And I am very pleased that my good friend Bill Emerson, vice chairman of Rock Holdings Inc. (the parent company of Quicken Loans), joins us as this month’s guest for our “Five Questions With” column.

And as the Irish say this time of year, “May the best day of your past be the worst day of your future.”

Happy New Year.


Barrett Burns

Third Party Study:
The Lenders Have Spoken Loud and Clear

Research Shows Widespread Use of VantageScore Credit Scores by Major Lenders for Credit Decisions

Consulting Firm Oliver Wyman Confirms VantageScore Credit Scores Were Used Across the Entire Lifecycle of Consumer Lending Excluding the Mortgage Sector

STAMFORD, Conn., January 10, 2018 – VantageScore Solutions, LLC, developer of the VantageScore® credit scoring models, today released the results of a study from Oliver Wyman, a global leader in management consulting, that examined the extent to which VantageScore credit scores were used by market participants.

The study reviewed a 12-month time period between July 2016 and June 2017, and examined the usage of VantageScore credit scores based on two dimensions: (1) usage by market participant type (i.e., credit card issuer, auto lender, institutional investor, direct-to-consumer websites, etc.), and (2) usage by function (i.e., pre-screen, origination/underwriting, portfolio management, consumer disclosure/credit monitoring).

Oliver Wyman’s findings dispel the misconception that the increase in the use of VantageScore credit scores is being driven principally by providing consumers with free VantageScore credit scores for credit monitoring purposes.

While providing free credit scores to consumers is an area of the market that VantageScore is proud to have helped pioneer, the report found almost 75 percent of the more than 8.5 billion VantageScore credit scores used during the research time period were used by lenders.

“Credit scores have evolved from an instrument used behind the curtain to help lenders automate underwriting into a ubiquitous consumer tool, which is why we are particularly pleased to provide a greater amount of information about where and how VantageScore credit scores are being used,” said Barrett Burns, president and CEO of VantageScore Solutions. “This report underscores that lenders support competition, and use VantageScore for credit decisions together alongside many other different types of data and other models. The wide industry usage of VantageScore also speaks to the depth of lender testing of VantageScore, which is an indication that competition is raising the bar for all model developers to build more predictive and inclusive credit scoring models.”

The Oliver Wyman report found that industry usage of the VantageScore model is widespread. Among the findings were that:

  • There are more than 2,700 unique users of VantageScore credit scores.
  • Overall, more than 2,200 financial institutions used more than 6 billion VantageScore credit scores.
  • Consumer and personal lenders, many of which are so-called “marketplace lenders,” used a total of approximately 750 million VantageScore credit scores.
  • The non-lender category, such as tenant screening, telecommunications, and utility companies, accounted for more than 750 million of the VantageScore credit scores used.
  • VantageScore is a data point used by investment firms as part of their investment decision-making (i.e., to analyze bonds backed by pools of loans for stress testing and valuation purposes).

Oliver Wyman found that credit card issuers were by far the largest users of VantageScore credit scores. The report found that:

  • Of the 6.4 billion VantageScore credit scores used by financial institutions, credit card issuers used approximately 4.9 billion.
  • Among credit card issuers, pre-screening and portfolio management (e.g., credit line increase/decrease decisions, risk assessment of portfolio, loss forecasting, etc.) represented the largest volume of uses.

“Lenders use credit scores in many different ways, often together with other inputs, including other credit scoring models. Our study confirms that VantageScore credit scores were used in significant volumes, throughout the entire lifecycle of consumer lending and across every relevant category except mortgage originations,” said Peter Carroll, a partner at Oliver Wyman. “We found a significant number of credit scores used specifically in the origination of new loans, which contradicts the idea that lenders use only one brand of credit score to make lending decisions.”

The final report is available online at and at

White Paper:
How Machine Learning Enhances VantageScore 4.0

VantageScore White Paper Explains VantageScore 4.0’s Use of Machine Learning

Technology expands the universe of borrowers to include more consumers with limited credit histories while maintaining regulatory compliance.

VantageScore Solutions released a new white paper that showcases the benefits of using machine learning to score more people with greater accuracy.

The white paper, “Scoring Credit Invisibles: Using machine learning techniques to score consumers with sparse credit histories,” provides a detailed description of the development process and integration of machine learning into the new VantageScore 4.0 credit score model, which is now commercially available.

VantageScore 4.0 is the first and only tri-bureau credit scoring model to incorporate machine-learning techniques to develop multidimensional attributes for consumers with limited credit histories. This development yielded significant performance increases among “dormant” consumers (those who had no update to their credit file in the prior six months). Data analysts then aligned and fully integrated these redesigned attributes and scorecards into a traditional scoring algorithm with a focus on compliance concerns.

Using machine learning techniques has led to a performance lift of as much as 16.6% for bank card originations and 12.5% on auto originations of consumers with dormant credit files. This innovation further bridges the gap between access to mainstream credit and those consumers without deep credit histories who have traditionally been frozen out of lenders’ automated underwriting systems.

“Part of our mission at VantageScore is to enhance our models so they stay fresh and relevant to the current economy and the state of consumers today,” said Sarah Davies, senior vice president, research, analytics and product development, VantageScore Solutions. “There remain millions of so-called credit invisible in the U.S. today, many of whom are creditworthy. We have a responsibility to update our models so they can accurately score more people without lowering credit risk standards and provide lenders with models that they can plug into processes with relative ease.”

Machine learning has been a part of the technology world for decades, but VantageScore 4.0 is the first and only tri-bureau credit scoring model to utilize its power. Setting it apart from conventional models that typically contain model attributes that incorporate only one or two dimensions of behavioral credit data (e.g., number of inquiries, mortgage balance, etc.), VantageScore 4.0 takes into account multiple behavioral dimensions while using innovative modeling techniques to score more consumers.

The white paper also discusses how model developers can enable FCRA-compliant model attributes that result in the use of machine learning.

To read the “Scoring Credit Invisibles: Using machine learning techniques to score consumers with sparse credit histories” white paper, visit

Quarterly Update:
The Default Risk Index

Bankcard Lenders: The Only Consumer Lending Category to Increase Risk Slightly in Q2 2017 over the Previous Quarter

VantageScore Solutions, LLC, developer of the VantageScore® credit scoring model, recently announced the quarterly update to its Default Risk Index (DRI) data series. The VantageScore DRI tracks the amount of default risk assumed by lenders in four U.S. consumer-loan categories: mortgage, bankcard, auto loans and student loans.

The update, which encompasses lender activity for the second quarter of 2017, is located in interactive infographics at and in a spreadsheet containing the full data series, which is available for download at the site.

Changes to specific index values are summarized in the following table:

VantageScore Default Risk Index: Update Summary, Q2 2017


(weighted avg.)

DRI vs. 

Auto $159.09 B 7% 4.02 91.2 -8%
Bankcard $85.36 B -6% 2.84 101.1 4%
Mortgage $410.56 B 27% 1.06 91.4 -5%
Student $23.67 B 7% 18.61 90.0 -4%

The aforementioned update reflects three key points:

  • Default Risk Index: The risk profile of new auto, mortgage and student loans tightened slightly in the quarter. The DRI for bankcard lenders, however, increased slightly for the second consecutive quarter to 101 (albeit at lower volumes). This is the first time since mid-2006 that the DRI value for any category has passed 100.1
  • Quarterly Snapshot: The second quarter may prove, in hindsight, transitional. Every type of lender either tightened on risk or volume, with only student lenders tightening on both. With reports of consumer delinquencies rising, it will be important to track this trend. 
  • Originations: The second quarter was a mixed story for originations. Auto lenders reversed the trend and increased volumes 7% versus last quarter. Bankcard lenders, however, continued a slow march to lower volumes. Mortgage originations grew 27% over the prior quarter but fell shy by 8% of the same quarter last year

1Each risk profile is indexed to the beginning of the series, where the third quarter of 2013 equals 100. DRI profiles that are close to 100 show an equivalent risk activity to the 2013 benchmark, whereas DRI profiles that are further from 100 distinguish risk activity that is either higher or lower than the benchmark (depending on the results).

About the Default Risk Index

The VantageScore Default Risk Index (DRI) and its website,, permit users to monitor the shifting quarterly risk profiles of loan originations in the mortgage, credit card, auto and student loan categories. The DRI is derived using credit file data from TransUnion and VantageScore odds charts — tables furnished to VantageScore users that match values on the 300-850 VantageScore scale range with their corresponding probability of default (PD) values.

The Default Risk Index is a measure of relative changes in risk level, benchmarked against the third quarter of 2013, the first period for which data were compiled. Interactive tools at allow users to view trends for each loan category and freely download the data from the charts.

The VantageScore Default Risk Index is provided as a free resource to institutional and individual investors, professionals in the securitization field, academics and all others interested in systemic lending risk. It will be updated quarterly, with data reflecting loans issued in the preceding quarter.

VantageScore Solutions and TransUnion developed the DRI to highlight limitations in the traditional ways credit scores are used to evaluate risk for categories or pools of loans. Today’s common practices — using “weighted average” or “distribution by score band” to summarize risk — are mathematically flawed. Reliance on those metrics can result in a miscalculation regarding the true credit quality of a loan pool as well as obscuring meaningful trends and leading a well-intentioned analyst to the wrong conclusions.

Did You Know:
Is There Such a Thing as a Fake Credit Score?

By John Ulzheimer

From time to time it’s not uncommon for people to use various pejorative terms to describe credit scores. Two such terms are “fake score” and “fako score,” which appear to be a play on the acronym used to describe credit scores developed by the company Fair Isaac, or “FICO.” The question is, however, is there really such a thing as a fake credit score?

While there is no standard in the credit scoring industry defining a “real” credit score versus a fake credit score, it appears the hypothetical standard is that anything that is not a credit score developed by Fair Isaac is somehow less valuable, artificial or fake. This is akin to suggesting a car built by Ford isn’t a real car because it wasn’t built by Chevrolet. Or, that a MacBook is a fake computing device because it wasn’t built by Dell. Of course, these comparisons are ridiculous because no one developer of anything stands alone, and certainly doesn’t own any market to the extent that a competing brand is properly referred to as being “fake.”

There are several credit score brands commercially available to and used by lenders to make lending decisions. Both FICO and VantageScore fit that description, but certainly, they aren’t the only two players that do so. There are also credit scores that are not commercially available to lenders but are available to consumers for the purposes of educating them about how credit scores work. All of these scores are scaled similarly, in that they range from roughly 300 to 850, with a higher score indicating lower credit risk.

In order for a credit score to be used by lenders in the United States, it must meet certain standards set forth in the Equal Credit Opportunity Act or “ECOA.” First, the scoring system must be empirically derived, which means it must be built using accepted statistical methods. Second, the scoring system is demonstrably sound, which means it has to work. And “work” in the world of credit scoring means that it must properly rank-order consumers based on the risk those consumers pose.

If a credit scoring system meets the ECOA requirements and it’s commercially available to (and used by) lenders, then by using any reasonable definition, it cannot be labeled a fake credit score. And, frankly, even if a credit score is only being offered for educational purposes, I still believe it has value. The credit industry, which includes an army of lenders, is better off if borrowers understand what credit scores are, how they work, what influences them and how they influence the terms offered by lenders. Educational credit scores do, in fact, provide this level of basic education to consumers and they’re immensely valuable.

Think back to a time, only 20 short years ago, when credit scores were seen only by lenders. At that time, consumers had little to no access to credit score education, or even to their own credit scores. It wasn’t until 2003 that the Fair Credit Reporting Act (FCRA) was amended by the Fair and Accurate Credit Transactions Act (FACTA), making it mandatory that mortgage applicants be given a Score Disclosure Notice, which disclosed the credit scores that were procured by their mortgage lender or broker. This was the first time that consumers ever had free access to their credit scores without having to ask for them.

It wasn’t until 2011 that consumers who were denied credit, based on their credit scores, were given access to their scores. Prior to 2011, when a consumer was denied based on credit information, they were sent a declination letter (formally referred to as a Notice of Adverse Action), but that letter only gave consumers information about where to get a copy of their credit report. The Dodd-Frank Wall Street Reform and Consumer Protection Act amended the FCRA, so now those same Adverse Action Notices must include the actual credit score used by the lender as a basis for their decision.

Point being, the momentum for consumers gaining access to their credit scores is clearly building. There is no shortage of places where consumers can get their credit score information. There are websites and programs by credit card issuers or other lenders where their customers or registered users can access their credit scores as well as educational material about credit scoring. None of these resources nor credits scores are fake, and all of them are valuable.

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.

Five Questions with:
Bill Emerson

Bill Emerson is vice chairman of Rock Holdings Inc., the parent company of Quicken Loans, the nation’s second-largest mortgage lender, andSept 2017 several other FinTech businesses. He is responsible for leadership, growth and culture development across the entire Rock Holdings portfolio.

Most recently, Bill was chief executive officer of Quicken Loans, a position he held for 15 years. Under his leadership, Quicken Loans became the second-largest retail mortgage lender and has closed more than $400 billion of mortgage volume across all 50 states from 2013 through 2017.

J.D. Power has ranked Quicken Loans “Highest in Customer Satisfaction for Primary Mortgage Origination” in the United States for the past eight years, 2010–2017. The company was also ranked highest in the nation for client satisfaction among mortgage servicers by J.D. Power for four consecutive years, 2014 through 2017, each year the company was eligible.

Detroit-based Quicken Loans employs 17,000 team members. The company was ranked No. 10 on FORTUNE magazine’s annual “100 Best Companies to Work For” list in 2017 and has been among the top 30 companies for the last 14 years. Computerworld Magazine also recognized Quicken Loans as one of the “100 Best Places to Work in IT” for 13 years, ranking No. 1 for eight of the past 12 years, including 2017.

Bill is an active spokesman for the housing industry and has testified before the United States Senate Committee on Banking, Housing and Urban Affairs and the House Financial Services Subcommittee on Financial Institutions and Consumer Credit. He served as chairman of the Mortgage Bankers Association (MBA) for the 2015-2016 term and is the former vice-chairman of the MBA’s Residential Board of Governors. He is also a board member of the Financial Services Roundtable’s Housing Policy Council (HPC) and the HPC’s Executive Council.

1. We’ve heard you describe that one of the reasons Quicken Loans is successful is that you value being at the intersection of technology and culture. Can you describe that intersection in a little more detail?

Since day one, culture and technology have come first for Quicken Loans. A company can have excellent team members and groundbreaking technology, but be lost without a strong culture. It’s our culture — with a meticulous focus on client service, teamwork, empowerment and challenging the status quo — that drives our victories on the technology front.

We encourage our team members to test out new ideas, take risks and understand that trying new things, even if there’s a risk of failure, breeds growth. This sort of flexibility and resiliency enables us to steamroll boundaries and drive the evolution of technology both within and beyond the mortgage industry.

The time, energy and thought we put into cultivating the reciprocal relationship between culture and technology is the foundation of everything we do.

2. There is a great line from the folks at Quicken Loans which is that you’re not a “for profit” and you’re not a “not for profit,” rather, you’re a “for-more-than-profit.” Describe for us what that means and in particular what you’re doing to revitalize Detroit.

Our Family of Companies creates commerce, drives innovation and in turn builds better communities by having a mission that’s powered by purpose. As a for-more-than-profit organization, we can be successful from a market standpoint, then use those successes to improve the greater community. There is a true business imperative here, as we find that our team members do better work when they are part of something bigger — making an impact in the communities where they live work and play. Quicken Loans’ commitments to the community and the economy work in the same mutual fashion as the company’s relationship with technology and culture.

Since moving to downtown Detroit, the Quicken Loans Family of Companies has invested over $5 billion in the city’s economy, employed over 17,000 team members, worked with Detroit Public Schools to introduce STEM programs and has a bold goal to bring 1,000 new businesses from ideation to action. Though this is just a thin slice of our involvement in Detroit, none of it would’ve been possible without the success of our business and for-more-than-profit mindset.

3. Quicken Loans isn’t just a mortgage company. There is a family of companies that are under the umbrella. What’s the common thread to all these companies and what are some upstarts that you are particularly excited about?

 Our culture is the thread that ties our Family of Companies together. When we recruit new team members, we look for people who exemplify characteristics of family, teamwork, grit and determination. Likewise, we focus on those same exact qualities when growing all of the businesses in the family, as well as when vetting new investment or partnership opportunities.

While our Family of Companies encompasses a broad range of products and services, a number of them were established to improve specific business areas impacting the mortgage process and beyond. One Quicken Loans sister company, Rock Connections, was created after recognizing a need for superior client service in call centers. As a member of our Family of Companies, Rock Connections is driven by the same client philosophies that led Quicken Loans to be recognized by J.D. Power for the past eight years — in multiple categories — for top customer service. Not only are we helping companies grow, we are also helping Detroiters. Rock Connections has emerged as a career destination for local residents, proving to be a workforce point of entry regardless of educational background.

Right now, we’re also extremely proud of the success StockX has earned, the world’s first “stock market of things.” This member of our Family of Companies was initially created as a platform for the sale and authentication of high-demand sneakers and expanded to included watches, handbags and streetwear. This start-up now has more than two million users each month and has grown to more than 100 full-time team members since its launch in February 2016.

4. Quicken Loans services the majority of its own loans. It falls under the customer mantra to “love, amaze and protect.” Why is this approach to origination and servicing successful and what metrics prove to you that it’s the right way to work with your customers?

Award-winning client service shouldn’t end when a loan closes. It should continue for as long as the client has the loan.

Our four-straight J.D. Power Awards for Mortgage Servicing and eight-straight J.D. Power Awards for Mortgage Origination — the most of any mortgage company — are proof of our commitment to clients. Many lenders get so caught up in the numbers on their spreadsheets that they forget about the real meaning of business — improving the lives of the people who use our services. At the end of the day, our client service, tech innovations, marketing strategies and every other business decision that has simplified the mortgage process ultimately stem from our commitment to the well-being of our clients and their families.

5. You played college football at Penn State. You coach your son’s team and I’m presuming you played Pop Warner football when you were young. What did you learn from the sport and from your coaches that have helped you over your career leading the Quicken Loans team?

In football, each person has a specific responsibility and the only way to get a win is if everyone does their job, understands everyone else’s job and — most important — communicates effectively with one another. That makes it a perfect analogy for business, relationships and life.

Participating in athletics taught me the value of counting on other people and working together to create a common goal at an early age. I’ve carried these values with me ever since and use them to guide my decisions to this day.

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