Are You Ready for Tomorrow’s Borrower?

May marks one of the calendar highlights for VantageScore. It is the time when we and our partners at SourceMedia get a chance to “go deep” into the subject of consumer credit risk.

It is often the case that this subject attracts scant attention at conferences, so we helped create a half-day symposium where credit card issuers have an opportunity to learn about the many advances our industry has made to assist issuers. These advances increase issuers’ businesses, as a result of sharper portfolio management, and also broaden their customer base without lowering pricing or credit standards.

This year’s “Consumer Credit Summit at Card Forum,” took place on May 7th in Miami. In addition to 11 highly relevant panelists, we also were honored to have two show-stopping keynote addresses.

First, we heard from Oliver Wyman, one of the world’s leading consulting firms. Rob Mau made the provocative assertion that many banks simply aren’t creating enough new value for their clients and that “Big Tech” offers some solutions.

Later that morning, one of the industry’s leading economists, Equifax’s Amy Crews Cutts, delivered a “State of the Consumer” address to inform card issuers about how consumer credit behaviors are evolving and how that evolution can impact default rates.

And of course, our own VantageScore data scientists participated in a number of discussions involving the latest news regarding data suppression within the credit files as well as an interesting chat that separated fact from science fiction when it comes to the use of machine learning and artificial intelligence (AI) in credit decisioning.

All three of the credit reporting companies and LexisNexis shared their thoughts. And we heard from some of the up-and-coming FinTechs that are developing products and services aimed at shaking up the industry. At VantageScore, we don’t just pay lip service to competition; we literally welcome it!

I also gave a brief introduction at the event, and I want to share some of those thoughts here…

The demographic makeup of the United States is changing. Legacy thinking and legacy scoring systems are not going to adequately prepare your business for tomorrow’s borrower. Consider this:

Is your business still relying on legacy scoring systems and marketing tactics despite these inevitable changes?

If so, read on! We’ve got a great lineup of articles this month, including a really interesting strategy outlined in a new whitepaper we developed. The strategy is a process of verifying credit scores with a “second pull” that can actually enhance the predictive insight of a lender’s credit decision.

At VantageScore, we are proud to be pushing the envelope in terms of our model and our thought leadership and welcome the competition.



Did You Know … Two Small Business Funding Decisions

By John Ulzheimer

Corporate taxes are down, consumer confidence is up, so now might be the time for you to pull the trigger and start that small business you’ve been contemplating. After you buy a domain name and register your business with your Secretary of State, you’re going to have to decide how to fund its operation. And unless you’re flush with cash, you are likely going to have to apply for credit.

At this point you’ll have to make a choice between two options, both of which are similar and different in subtle ways. You will have to choose between using your pre-existing personal credit to fund your business or applying for new credit cards or loans in your company’s name.

Using Pre-existing Credit Accounts

Many small business owners choose to use their existing personal credit in order to fund the operations of their small business. That means using personal credit cards and personal lines of credit, such as home equity accounts. The advantage of using existing credit accounts rather than opening new business accounts is the speed and ease. You don’t have to worry about opening new accounts because you’ve already got them.

The disadvantage of using your existing personal credit is two-fold. First, you’ll be co-mingling business expenses with your personal expenses. So, for example, you may use your credit card to buy groceries one day and the same credit card to buy printer ink the next day. And while that might not seem to be a big deal, your tax accountant would likely disagree because some of your purchases will be deductible and some will not, and comingling requires you to separate your expenditures accordingly for proper and legal accounting.

Opening New Small Business Credit Accounts

What your tax accountant will likely tell you is to open new accounts in your business’s name and then use those accounts to fund the business operations and nothing else. This will ensure proper accounting of all business expenses without the possibility of improperly deducting non-business expenses. But if you choose this approach, you’ll have one more choice to make.

Personally Liable, or Not?

When you apply for business credit the lender may require that you sign a personal guarantee. A personal guarantee means that you, personally, will guarantee payment of the debt if the company ever defaults. If you incur debt on behalf of your company and your company goes out of business or otherwise defaults on the debt, you will have to make good on it even if the money has to come out of your own pocket.

If you do not want to be personally liable for your company’s debt, then you may have a harder time finding business credit, especially if you’re a new company. And there’s another thing to keep in mind if you do choose to go the personal guarantee route. If so, your credit reports and credit scores will be accessed by the lender. If you must sign a personal guarantee, that means the lender feels more comfortable with you as an individual borrower than your company as the borrower. The lender will want to ensure payments will be made if your company defaults, and that means the lender will depend heavily on your personal credit reputation before approving your application.


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.

Verify “Credit Invisibles” to Drive Predictive Lift

A new white paper shows how creditworthy consumers are scoreable when credit scores are twice verified using VantageScore 3.0, improving predictive performance by more than 20 percent.

VantageScore Solutions, LLC, developer of the VantageScore® credit scoring model, released a new white paper that details how lenders can increase the predictive level of risk assessments for “credit invisible” consumers, those who have less information than is required in order to generate a conventional credit score. The white paper, “Boosting Predictive Power Using Multiple Scores in the Credit Invisible Population,” examines the verification process that uses VantageScore 3.0 on these credit invisibles (also referenced as the universe expansion population) in order to score two to three million more consumers.

VantageScore research indicates that using VantageScore 3.0 alongside a verification process that combines and compares the differences, if any, against two VantageScore 3.0 credit scores from two separate credit reporting companies (CRCs) drives additional predictive performance by more than 20 percent for a quarter of the consumers who are typically credit invisible.

The results of using a two-CRC verification process to identify consistent and predictive risk, led to an improvement in a traditional credit score’s predictive levels:

  • By establishing a credit score “verification” process, VantageScore 3.0 can yield a ‘twice verified score,’ which delivers a 20-26 percent predictive performance improvement in the credit scores of approximately one in four credit invisible consumers.
  • Approximately 37.6 percent of the twice verified universe expansion credit scores received a credit score greater than 600, qualifying them in the conventional lending space. 22.6 percent of these consumers score above 660. Translating to about 2-3 million highly creditworthy consumers.

“Since VantageScore was formed, our mission has always been to score more consumers, more accurately without loosening risk standards. Using a verification process that employs VantageScore 3.0 from all three CRCs, lenders can now confidently gain more predictive power and distinguish new opportunities in the underserved population,” says Barrett Burns, CEO and president, VantageScore Solutions. 

For more details on the “Boosting Predictive Power Using Multiple Credit Scores in the Credit Invisible Population” white paper, visit:

Four Steps to Clean Up Your Financial House

Are you feeling good about your finances? Or do phrases like “account balance,” “credit score” and “retirement savings” give you a twinge of anxiety?

Don’t worry, you’re in good company. Only 24 percent of the Millennial generation have basic financial literacy, according to the National Endowment for Financial Education. When it comes to getting their financial house in order, most Millennials would prefer not to set foot in that proverbial house in the first place. Getting yourself out of debt and building enough savings to cover your expenses in an emergency is a marathon, not a sprint. Establishing small, incremental changes in your financial habits today can make a big difference in your financial health months or even years from now.

Here are a few steps you can take today to spruce up your money management process and get yourself on the path to financial health. Stay on track with your plan, and a year from now, you should be better off.

Check your credit score — Before you start the work of realigning your finances, you should start by checking your credit score and reviewing your credit report. It helps to know where you stand financially right now, and the good news is, even if your credit score is not as high as you’d like it to be, you can take steps to improve it. Establishing a history of on-time payments and maintaining a healthy credit utilization ratio are two things that could improve your credit score in a short time. One way to access your credit score without any cost is to find out if your bank or lender offers your VantageScore for free through its website.

Make a plan to knock down your debt — Track down all your accounts — checking, savings, investment, credit cards and other loans — and do the math to find out your net worth. That’s your benchmark to help you track your process, but in the beginning, the truth can hurt. However, knowing how much you have in savings and knowing how much you owe will give you a valuable blueprint on where you need to direct your energy. From there, put together a household budget, and figure out where you can trim expenses, so you can pay ahead on your debts, one account at a time.

Automate your savings — You’re much more likely to accumulate savings when you make the decision once and let the rest happen automatically. Log onto your bank account and set up an automatic transfer from checking to savings, starting with a small amount, preferably timed with your regular pay day. If you can manage to set aside $85 a month, in a year’s time, you’ll have set aside a full $1,000. That’s a decent emergency fund for things like car repairs and doctor bills.

Open a retirement account — Here’s another way to automate savings. If you haven’t done so already, start contributing to a retirement plan. Even better, if your employer makes both a plan and a match available to employees, sign up as soon as you can. If you can’t afford to contribute the full amount to get the full match, start with a small percentage, and slowly add on.

Taking the first steps to gain control of your finances isn’t easy. Using this time to set up good financial habits today can get you in a better place tomorrow. Test your credit score knowledge at, and be sure to visit to learn what things influence your score, and what you can do to improve it.

5 Questions with Clarifi Financial Literacy Counselors

Clarifi is a leader in financial capability services with a mission to create hope by helping people identify and secure the most important assets in their lives. The organization provides a number of one-to-one counseling and education programs to help consumers reduce debt, understand and improve credit, save for an emergency, and prepare for first-time homeownership. It also gives individuals the financial knowledge to become well-informed consumers in a complex marketplace.

A few weeks back, VantageScore was privileged to present at Clarifi’s “Tales of Triumph” Awards Luncheon, which celebrated clients who have benefitted from the support and insight of Clarifi’s credit counselors. This month, we invited Clarifi counselors to answer our “Five Questions with…”

At this year’s Clarifi Awards Luncheon, can you tell us a few of the most compelling stories that were awarded?

One of the most compelling stories recently was about a young woman who had recently lost her job of 5 years.  She took this opportunity to learn the basics of money management so she could earn a business line of credit and start her own company. She had grit, and with Clarifi’s counseling and coaching and pushed herself for six months or so, so she could accomplish her mission of starting a her own business.

As a Clarifi counselor, what are some of the most common questions you receive from people who are looking to open up their own business in the Delaware Valley of Pennsylvania? And how do you address these questions?

Clients who have the goal of being a business owner often ask how they can secure funds to start their business, what tools they need and how to balance a budget. These questions are very similar to the questions we get from first time homebuyers, college students or people just looking to improve their financial literacy. I tell aspiring entrepreneurs to make sure to understand if their credit is in good standing, and if it needs work I help to identify what to prioritize so they can get a startup loan. As far as budgeting, just like with a household budget a client needs to know what is coming in and what is going out especially in the first crucial months of starting a business. Finally, I make sure that the client has access to other great resources like the Small Business Administration’s SCORE program or local initiatives like Philadelphia Industrial Development Corporation or Entrepreneur Works, which help fund small businesses.

For someone who is looking to reduce their debt, what happens on the first and consecutive appointments with a Clarifi Counselor?

In a first appointment with a client trying to tackle debt we have to answer a couple of key questions: What type of debt? What does the client’s budget look like? What have they done so far to reduce debt? The answers to these questions help establish what the rest of our relationship as client and counselor looks like. If a client has credit card debt and overall a pretty balanced budget we may steer them to a Debt Management Plan. We would negotiate lower rates with the client’s creditors and usually get them a reduced monthly payment that along with some budget tweaks can help them stop relying on credit cards. If a client is struggling with federal student loan debt, we may work to get them in a more affordable repayment plan with their lender. If the loans are private we will see about options for refinance or settlement depending on the status. Finally for clients who are looking to clear up old collections that are still haunting them from tougher times, we walk them through saving towards settlements and making those settlements with each creditor without relying on Debt Settlement Companies that may take additional fees.

How do you distinguish the clients who are ready to own a home between those who should continue to rent (for now)? And for those who should still be renting, how do you prepare them to become first-time homeowners?

Clients often come in being super enthusiastic about the prospect of buying their first home. It is one of the most rewarding things we help people to accomplish, but it is a huge step with serious financial obligations attached to it. The first thing I do to determine how ready a client is, is to identify their budget. If they are in the red every month, we need to make some tweaks to start building savings towards a down payment. Then there is a credit check to make sure that they are credit ready. Most clients, even those who reach or surpass the minimum score, still would benefit from improvement. Sometimes this means settling old collections, other times it’s just a matter of paying down a couple credit card balances or maintaining payment history on new lines of credit. Clients who come in with a balanced budget, good credit and some savings may be ready to make the purchase, but we still provide them with resources about the purchase process, home inspection, first-time homebuyer grants and maintenance costs after purchase. For some, hearing about all that is involved makes them decide to wait a little longer, while others feel ready to make the jump.

Many students who are looking to start their new lives post-graduation run into issues when it comes to obtaining their first apartment or securing loans due to a lack of credit history. What are the first steps these students should take when building their credit so they can start their new lives?

Student loans are just that, loans. They are installment loans with a fixed monthly repayment in a finite term for repayment. Each loan appears on a borrower’s credit report as a separate trade line starting when it is dispersed to the school. Federal student loans remain in deferment while the borrower is in school. Then the borrowers are issued an additional 6-month grace period after they finish before they have to start repaying that loan. Thus, the entire time they are in school they have active trade lines working to generate a score for the borrower.

At Clarifi we help young borrowers learn how to budget and manage that student debt along with their new obligations. We make sure they know about their eligibility to sign up for affordable payment plans based on their income level, if they have federal student loans. We also help clients see the big picture because sometimes the lowest monthly payment is not the best option depending on their financial goals. Managing student debt is one of the best approaches to ensuring a healthy credit score.

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