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A note of appreciation…and big usage news

One of the great pleasures of my position is working side-by-side with tireless advocates who simply want to leave our lending industry better than it was when they found it. One of those highly impactful people is David Stevens, who retired from his position as president and CEO of the Mortgage Bankers Association (MBA) earlier this year.

I’ve gotten to know Dave well during my previous four years as an MBA board member and as we faced down a number of industry challenges. I can attest to his dedication, strategic mind, leadership, energy, and social conscience.

Dave also has the unique ability to engage and find common ground no matter your political persuasion, which most certainly came in handy during these polarizing times. Achieving increased sustainable homeownership was his goal for both consumers and lenders.

He’s also fun to be around – which, to me, is the most important characteristic one can have. No matter how pressurized the situation, Dave is always quick to disarm a room with a joke or self-deprecating anecdote.

I’d like to personally thank Dave for his service and dedication to the mortgage banking industry. Whether you were a banker, a vendor, a borrower, a policy-maker or a consumer aspiring to be a homeowner, Dave had your back. He is, indeed, leaving the industry better than he found it.

Congratulations on your retirement, Dave, and we wish you all the best in your future endeavors. Hopefully, we’ll see you out on the slopes soon!

By the same token, congratulations to Bob Broeksmit. He’s taking over the reins from Dave and has just finished his first MBA Annual Convention as president and CEO of the MBA. We’ll let him recover a little before we hit him up for a “Five Questions with…” column. In an asset class this large, there is still much to do to expand responsible homeownership.

This month’s newsletter is a critical one to read. Hot off the presses is Oliver Wyman’s study on VantageScore’s market adoption.

One of the questions we get most often is who uses VantageScore credit scores and how. The Oliver Wyman study demonstrates that usage of VantageScore credit scores by lenders and other market participants is deep, mainstream and prevalent across all consumer lending categories except the mortgage sector. I don’t have to remind readers that FICO enjoys what many consider to be a government-sanctioned monopoly in the mortgage sector…poised to end, I might add, with the enactment into law this past May of S. 2155 (section 310), which, among other things, requires the FHFA to establish “standards and criteria” to be used by Fannie Mae and Freddie Mac to validate and approve competitive scoring models for implementation — something we applaud because we know that healthy and fair competition always benefits both consumers and lenders.

Among the important takeaways from the report is that, in addition to VantageScore’s proud track record as the score consumers use to measure their own creditworthiness, usage of our scores by financial institutions continues to grow. Indeed, nearly 10.5 billion credit scores were used by over 2,800 users in the time period between July 1, 2017, and June 30, 2018, which represents a 20 percent and 3 percent increase respectively over last year’s adoption results.

Over 60 percent of credit scores were used by financial institutions, and credit card issuers were by far the largest users, representing nearly 4.4 billion of the total scores used.

The surge in usage continues a broader trend. Just in the past five years, VantageScore’s usage increased by more than 300 percent!

This groundswell usage of our credit scores and how we continue to reshape credit scoring is a testament to the power of competition.

In fact, at last week’s MBA Annual Convention, newly appointed MBA Board Chairman Chris George, CEO of CMG Financial, firmly endorsed competition, saying at his installation ceremony, “When has lack of choice ever been good for the consumer?” Indeed, our rising adoption numbers are proof that consumers, lenders and investors benefit when competition is infused into the marketplace. Congratulations on your new appointment, Chris, and thank you for your strong statement on the value of competition. We agree.

Finally, one last “congratulations” is in order. Our Communications group, led by Jeff Richardson, who, in conjunction with our public relations firm, APCO, was named the winner of an industry award in the category of “Best insights” by PR News, a top marketing-communications media outlet. Many other well-known brands of national standing were finalists. Congratulations to Jeff, his team and the APCO team.

Regards,

Barrett Burns
President and CEO

Your score vs. medical debt

Almost every single form of debt is incurred voluntarily. We choose to open and use credit cards. We choose to apply for and borrow money to buy cars and houses. What we don’t choose to do is get sick or hurt ourselves to the point where we have to incur a large amount of medical debt, some or much of which might not eventually be paid by insurance coverage. And unless you have the capacity to pay for uncovered medical services out of your pocket, it’s likely you may default on your debt and damage your credit reports and the associated credit scores.

How does medical debt end up on credit reports?

It’s unlikely that your doctor or medical service provider reports information to any of the big three credit reporting companies, Equifax, Experian, and TransUnion. But, it is likely that any defaulted medical debt will be outsourced by the service provider (or “consigned”) to a third-party debt collector. And almost all third-party debt collectors, also known as collection agencies, do report to the credit reporting companies.

Can medical collections lower my credit scores?

There are certainly scenarios where medical debt collection accounts can lower your credit scores. The extent to which your scores will be impacted depends on a variety of factors including the age of the collection and the prevalence of other unrelated derogatory information. There also are scenarios where a medical collection will not have any impact on your credit scores. But generally speaking, most medical collections have a negative impact on your credit score.

Can I get medical collections removed from my credit reports?

Under normal circumstances, medical collections, and all other types of collections can legally remain on your credit reports for up to seven years from the date of default of the underlying debt. That statute of limitations comes straight out of the Fair Credit Reporting Act. Of course, if the collection is flat-out incorrect or the debt collector cannot verify the accuracy of the item, then it must be removed immediately, as the law states.

There is, however, another way to legally and ethically get a medical collection removed from your credit reports. In September 2016 the credit reporting companies implemented a new policy whereby they began removing medical collections from credit reports if they had been paid by insurance or were being paid by insurance. This policy ensured that consumers who were saddled with medical debt but also had insurance coverage wouldn’t have to live with a medical collection for 7 years.

Can I delay the credit reporting of a medical debt collection?

You can’t delay the credit reporting of medical debt collections, per se. But, there are policies and laws in place that will delay the credit reporting of medical collections. The first is the National Consumer Assistance Plan or (NCAP). NCAP is the program that resulted in the aforementioned removal of medical collections that were paid by insurance policies. In addition, NCAP will require collection agencies to wait at least 180 days from the date the debt went into default to report to the credit reporting companies. This applies to all consumers.

A veteran receives an additional 180 days to the waiting period. In May 2018, the Fair Credit Reporting Act was amended by the Economic Growth, Regulatory Relief and Consumer Protection Act. As such, by no later than May 24, 2019, medical debt incurred by a veteran cannot be reported for at least one year from the date the services were rendered. Any medical collections incurred by a veteran must be removed from a credit report once the debt has been paid or settled and does not require the payment to come from an insurance company.

In addition, some credit scoring models such as VantageScore 3.0 and 4.0 exclude paid collections, including paid medical collections, when computing a credit score.

Model usage surges 20+ percent

Usage of VantageScore Credit Scores Surges More than 20 Percent Versus the Previous Year and More than 300 Percent over the Past Five Years.

Oliver Wyman report discloses that over 2,800 unique users – mainly financial institutions – used nearly 10.5 billion scores in a recent 12-month period.

VantageScore® Solutions, LLC, the company behind the VantageScore credit scoring models, released today the results of a market study conducted by Oliver Wyman, a global leader in management consulting, which examined the usage of VantageScore credit scores by lenders and other market participants.

Oliver Wyman studied the usage of VantageScore credit scores in the 12-month period between July 1, 2017, and June 30, 2018 (consistent with its similar study one year ago), and found that nearly 10.5 billion credit scores were used by over 2,800 unique users. This represents a 20 percent increase in the number of scores used versus last year’s study.

“This year’s study confirms that VantageScore credit scores are used across multiple use cases (e.g., pre-screen, origination/underwriting, portfolio management, consumer disclosure/credit monitoring) and all lender categories (except mortgage originators),” said Peter Carroll, a partner at Oliver Wyman. “Specifically, we found that lenders are getting more comfortable with using VantageScore credit scores for underwriting decisions, as confirmed by the 50 percent increase in score use relative to last year’s study. Consumer websites, as well as traditional banks, are also heavy users of VantageScore credit scores as a way to engage with their customers and/or prospects.”

Additional findings from the study include:

  • Among the total number of users, the number of financial institutions that used VantageScore rose eight percent to nearly 2,500, representing usage of approximately 6.4 billion credit scores.
  • Among financial institutions, credit card issuers were the largest users of VantageScore credit scores; they accounted for approximately 4.4 billion scores used overall, of which at least 68 million VantageScore credit scores were used for new card originations. Overall, according to an Experian-Oliver Wyman Market Intelligence Report, the credit card industry issued approximately 117 million new credit card accounts during the study’s timeframe.*
  • Companies that provide consumers with access to VantageScore credit scores accounted for approximately 2.3 billion scores used, nearly double the amount used in the same period last year.

Recent growth in the use of VantageScore credit scores continues a trend that extends back at least five years. Both the number of users and the volume of scores used has increased significantly.

“In the past five years, we’ve seen competition flourish. Within that time period, VantageScore credit score usage increased by more than 300 percent and the number of users increased by almost 12 percent. The continued growth in the use of VantageScore credit scores and how we’ve changed the credit scoring industry for the better is a testament to our model’s ability to provide a highly predictive credit score to a greater number of consumers,” said Barrett Burns, president, and CEO of VantageScore Solutions.

“In turn, this provides lenders with an expanded universe of creditworthy applicants and borrowers – many of whom are underserved and would receive greater access to mainstream credit products. We’re proud to have brought competition to the credit score market and pleased that so many market participants are choosing to use VantageScore in their businesses,” Burns continued.

Oliver Wyman’s study examined usage trends in all consumer categories, including credit card, auto lending, mortgage origination, personal loans, and tenant screening. The study showed deep penetration in all markets except the mortgage sector, where lenders are required to use outdated, conventional scoring models. Earlier this year, Congress passed and the president signed a law to establish competition in the mortgage market for model developers.

“As a result of the new law, we look forward to extending to mortgage lenders and the consumers they serve the benefits that credit score competition has brought to the other major sectors of the market,” concluded Burns.

The report is available at www.vantagescore.com/marketadoption.

Money management tips for kids

“Teaching kids about money management at any age and every age”

As a parent, you understand the importance of successful money management firsthand. Every bill must be accounted for and the budget balanced. It’s the only way you can manage your household and save for those bigger events in life. Your kids, on the other hand? They are not quite so money-savvy, and you’d like to change that. After all, smart money management will help them throughout their entire lives. So how do you teach these skills to your kids?

While every child is different, the age of your children can play a big role in how you teach them money management skills. So, to help you guide your kids down the path to fiscal responsibility and successful long-term money management, follow these tips from VantageScore Solutions.

1. Ages 3-5: Starting small with small conversations
How early can you start talking to your children about money? Earlier than you think. In fact, in many cases, once a child is old enough to take part in conversations (speaking and listening), they are old enough to discuss money. Explain to them that things they see in the store — and invariably want — cost money, and if they don’t have money, they cannot get them. This is also a great time to introduce a piggy bank and discuss why you’re placing money in the piggy bank.

2. Ages 6-8: Leading by example
Children at this age are incredibly observant of the world around them, and they are old enough to ask detailed questions about the things they see — including how you handle money. Trips to the bank are a good way to show them the value you place in saving money — and don’t be afraid to put things back at the store when they aren’t necessary. They will benefit from seeing it’s OK not to buy something.

3. Ages 9-10: Make learning fun
Children at this age are able to grasp more in-depth concepts, and they love games. Use that to play games with your child that stress the value of saving and money management in a fun, interactive way. Whether you play through board games like Monopoly, or through video or online sources, games, where your child can win by being smart with their money, will offer long-term benefits.

4. Ages 11-13: Learning to work for wages
You may have already been giving your children an allowance based on their completion of household chores, but now is a great time to help them get work outside of the home. Whether it is walking dogs in the neighborhood, babysitting or mowing lawns, your children have the chance to bring in real income at this age. And when they do, sit down with them to manage it properly. Open a savings account for them and show them that some money needs to be set aside for savings and what portion can be enjoyed immediately for spending.

5. Ages 14-18: Strategies for long-term savings
With teens, a successful conversation is often all in how you frame it. Ask your teen if they want to sit down and plan out their budget and you’ll get a no. Ask them if they want to sit down and figure out how they can buy their first car, the laptop they want or go to college, and they’re more apt to listen. Start with the goal in mind and backtrack from there to set a fiscal budgeting plan. Teach them the difference between gross and net income; thus, budgeting and spending should be based on one’s expected net income, not gross income. Encourage your teen’s ideas throughout the process and they’ll take more ownership over the plan.

Join Us:
Trended Credit Data webinar

Join VantageScore Senior Scientist Nick Rose as he presents “Trended Credit Data: Impacts and issues on consumer risk scores,” presented by the Consumer Bankers Association (CBA) on Thursday, November 15 at 2 pm EST.

You can register on the CBA webinar registration website, and view the webinar for free by using the PROMO CODE: Vantage15.

WHAT:

Trended credit data represents an important change in the way credit behaviors are reported to the three nationwide credit reporting companies (CRCs). Now, instead of providing a static snapshot of credit activity — the traditional way that credit data has been interpreted — trended credit data offers a view over time and helps assess the trajectory of consumer credit behaviors.

The result: greater predictiveness, particularly among lower-risk populations. Hear about how trended credit data can impact a lender’s bottom line and especially amongst the bankcard consumer loan category.

THIS WEBINAR WILL COVER:

  1. Understanding trended credit data, and the value it brings to lenders
  2. Overview of static vs. historical/trajectory of borrower behavior
  3. Bankcard consumer behavioral analysis/payment profiles

TOP 3 BENEFITS TO ATTENDEES:

  1. Insights on bankcard payment attributes and its predictive improvements on credit scores
  2. Performance lift in credit score predictiveness and accuracy
  3. Better identification of Prime and Superprime loan candidates

 

Credit insights from the CFA, now 50 years-old

Jack Gillis is executive director of the Consumer Federation of America, where he previously served as director of public affairs since 1983. In“Feb2018” addition, he is an advocate of issues relating to auto safety, auto buying, fuel efficiency, and consumer protection. The author of 74 consumer-education books, he’s served as contributing consumer correspondent for NBC’s The Today Show, and as contributing editor and columnist for both Good Housekeeping and Child Magazine. Gillis was cited by the National Press Club as “one of the best in consumer journalism.” He has testified before both the Senate and the House at the invitation of Republicans and Democrats, and is a former adjunct professor at George Washington University, where he taught in the Graduate School of Government and Business Administration.

1) The CFA recently celebrated its 50-year anniversary. What do you think has changed the most in this 50-year span in the consumer advocacy realm?

The three biggest changes relate to the environment in which we operate: the press, Congress and advocacy tools.

Regarding the press, historically, media outlets had a variety of consumer reporters with an expertise in various food, safety, and financial issues. Today, there are very few specialized consumer reporters, and news organizations have become so thinly staffed that it is difficult to find a reporter with particular expertise on the wide variety of consumer issues in CFA’s portfolio. As such, major stories go unreported, corporate advertising is considered when addressing certain issues, and educating reporters on a particular issue is a challenge because they are often responsible for covering an impossibly wide variety of issues. As a result, CFA invests a tremendous amount of effort in creatively reaching out to, and educating the media.

On the congressional front, the well-established divide between the political parties and associated unwillingness to compromise have created a nearly impossible environment to pursue consumer protection issues. In the past, because both left- and right-leaning politicians were also consumers, it was often possible to reach compromise solutions to consumer issues. Today, the hostility between the parties has made compromising on consumer protection issues nearly impossible.

The good news is that advocates have taken to social media to communicate with the public and use those tools to impact public policy. Social media has become an effective means of educating consumers and bringing about pro-consumer marketplace changes. On the other hand, it has become a powerful tool for sellers who have creatively blurred the lines between promotional marketing and true consumer education.

All of these items have posed significant challenges to the success of consumer advocacy. Nevertheless, by understanding these challenges, we are still able to initiate important consumer protections.

2) What are some of the new initiatives that you want to drive in your new role as executive director at CFA?

Our biggest challenge will be reaching out to and engaging millennials and centennials in pro-consumer policymaking. These groups receive enormous amounts of marketing information about the products and services they buy and use, much of which appears to be unbiased advice. Because products and services have become so complex, they are voracious consumers of this information. Our challenge will be breaking through with unbiased, comparative consumer information that will actually help them make informed choices rather than choices influenced by creative and clever marketing programs.

3) CFA is hosting its annual Financial Services Conference next month. How does CFA determine what topics it will cover and how discussions will be approached?

Our most important goal is to facilitate open and respectful dialogue between what can sometimes be opposing viewpoints. For advocates to be effective, they have to fully understand the products, services, and objectives of those selling financial services. Conversely, those companies, who want to be successful need to understand the challenges facing consumers who use their products. We believe that creating a forum where true dialogue between buyers and sellers can be facilitated will result in a better understanding of the issues and, hopefully, consensus-based solutions. In order to accomplish this goal, we depend on an advisory committee made up of leaders in the various financial communities and the identification of issues from CFA’s long-standing financial consumer advocates. Both the corporate advisory committee and CFA staff contribute ideas for discussion as well as suggested experts representing a wide range of perspectives.

4) One of the top complaint categories amongst consumers is credit and debt. What are some ways the CFA is helping to remedy that issue?

CFA focuses on improving consumer education and financial literacy as well as promoting sensible and thoughtful public policy. Financial products and services related to credit and debt have become both extremely varied and complex — and the need for unbiased education is great. With help from its partners, CFA researches consumer attitudes towards and understanding of, financial issues in order to thoughtfully and effectively improve the consumer experience. One example is our working with VantageScore on our consumer credit knowledge program. The more consumers understand how their credit score is developed and used, the better able they are to manage that score. The annual CFA/VantageScore consumer survey and credit score quiz have significantly increased consumer understand of their score and its importance in their financial well-being. By bringing CFA’s advocacy and personal finance expertise together with VantageScore’s resources, we have been able to exponentially increase our effectiveness in addressing consumer concerns about credit and debt.

5) How is CFA able to provide “coverage” and expertise across so many consumer products and services?

While the 28 members of the CFA staff pales in comparison to the staffs of America’s financial corporations, we make up for it in expertise, dedication, and 100 percent focus on the financial concerns of consumers. Combining the hard work and stellar reputation of our incredible staff with the resources of our partners, we’ve created a platform for change that has continually improved the market environment facing today’s consumers.

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CBA MBA
VantageScore Licensees:
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