Navigating an Ever-Changing Tide

Dear Colleague:

When VantageScore came on to the scene just about 14 years ago, a bright light was shown on the fact that consumers didn’t have just one credit score and that lenders have access to many different models that produce different scores for consumers.

The recent introduction of a new model from our competitor FICO and the ensuing media coverage points to the fact that there remains many questions and more education is clearly necessary. I thought I would take this opportunity to address some of the questions here.


First of all, why do we develop new models? While I cannot speak to our competitor’s motives, I can share that most credit scoring models use similar types of credit file information but we use that data differently by implementing modern mathematical architectures in an effort to build the most predictive model possible. How much weight is put on a particular characteristic (such as utilization of available credit, payment history, age and mix of credit activity, etc.) and how these are measured, will vary from one model to another, leading to differences in scores. Extensive testing is employed to verify the most predictive outcomes.

A useful analogy is to look at the different rankings for sports teams. Different rankings use different inputs and formulas to rank teams from best to worst, often in an effort to predict who will win the championship. At the end of the year, some rankings were more accurate than others.

Credit score models are similar. Multiple models are available to lenders, introduced at different time periods, and some will be more predictive than others. Newer models, in the case of VantageScore, use the latest innovations to be more predictive and accurate.


Changing economic environments also might compel a credit score model developer to introduce a new model. For example, if volatility is introduced into the system (such as the additional risk that was driven into the environment by The Great Recession), the need may arise to introduce new models to take that volatility into account. Indeed, we introduced VantageScore 3.0 as the economy emerged from The Great Recession and then launched VantageScore 4.0 after that economic impact was mostly washed out of the system.


In order to more accurately reflect the changing dynamics and to provide the highest predictiveness and accuracy, a model developer will update a model and, at the same time, take advantage of any new data types and technological advances that might add to the model’s ability to score the broadest possible consumer population in a safe and sound manner.

Let’s take our latest model as a case study. When we developed VantageScore 4.0, we recognized the predictive power of trended credit data. Trended credit data examines credit activity over a period of time (sometimes as much as 24 months) and more accurately reflects a consumer’s true creditworthiness by tracking the trajectory of credit behaviors instead of a snapshot of credit activity from the previous month.

VantageScore’s use of trended credit data recognizes and appropriately rewards those who are taking steps to improve their credit health over time. For example, the way VantageScore uses trended credit data rewards those with high utilization rates who consistently pay down outstanding balances as well as those who regularly pay more than the minimum amount due on outstanding balances. Conversely, trended credit data will alert a lender to early indicators of a deterioration in credit quality


With any model version update, credit scores are expected to shift because more predictive model would apply new – more accurate – scores to some consumers. With VantageScore 4.0, we saw that more consumer scores increased than decreased when compared with our earlier model, VantageScore 3.0, but these shifts aren’t as informative as they appear. Here’s why:

A new version of a credit score model only matters when a lender chooses to adopt it. And that takes a long time from when a model is initially introduced, and between such times scores continue to shift based on the updates to the credit files. The point is: these estimates of how scores will shift, will also shift over time!

From a consumer’s standpoint, I get it. Bart Simpson’s famous “Ay, caramba!” line comes to mind.

But here’s what consumers need to know:

  1. For the most part, credit score models like the VantageScore models are all based on information reported in the consumer credit files.  
  2. All models will reward positive behaviors, such as on-time payments and low utilization rates on credit cards and reduce scores for consumers who have mishandled their credit accounts (e.g., missed payments and high balances). This basic foundation of credit scoring remains true whether the model uses trended credit data or not.
  3. Understand that the score you might check on your own isn’t likely to be the EXACT score a lender will use.
  4. You can use the free score to understand directionally whether you are likely to be approved for a loan and at what terms.
  5. And be sure to shop around for the best terms for your loan; make those lenders compete for your business!


Barrett Burns

CEO and President, VantageScore Solutions, LLC

Did You Know?:
What is the function a credit score serves?

What does a credit score do and (more importantly) what does it not do.”

Credit scores are ubiquitous. Nearly every adult in the United States has ongoing, free access to their credit scores with the click of a mouse or through your mobile device. This is a major departure from just a few years ago when credit scores were a tool for “back office” lending professionals who used them to make decisions on applications (they still do!).

But nowadays, a person’s credit score is one of the main tethers someone has to their financial services provider. And with that access and engagement, misconceptions have risen. That’s why in the next few issues of THE SCORE, we’ll tackle some of these issues.

First and foremost, one of these concepts is fundamental: what is the function a credit score serves?

Below are “facts and fictions” about what credit scores actually do.

FACT: A credit score is a mathematical measurement, usually a three-digit number, based on your financial information that indicates the likelihood that you may default on a loan or other credit obligation. Default is typically defined as falling significantly behind (for example, 90 days or more) on your payment obligation over a certain period of time.

FICTION: A credit score provides an absolute prediction of whether a person will default (i.e., going 90 days or more late) on a loan.

EXPLANATION: A credit score model “rank orders” a population which means it compares that population and provides a ranking of consumers from most likely to default to least likely to default, where typically a higher score represents a lower likelihood of default compared to a lower score – this is different than an absolute prediction. To keep it simple, if a credit score were assigned to ten people only, it would rank those people in order of most likely to least likely to default, based on their past credit history.

Because the credit score model ranks a population, the risk that those scores represent shifts based on economic conditions (such as the unemployment rate or home values), changes in lending practices or other factors.  

The take-away for consumers is that because the credit score is not an absolute predictor of whether a person will default, a lender takes much more information (e.g., income, assets, employment history and other factors) into consideration before making a loan decision. This information in its entirety enables a lender to make judgements on whether a person has the ability and is likely to repay a new loan.

FACT: A credit score model is one factor lenders often use to determine whether to extend you credit.

FICTION: A credit score is a measurement of a person’s overall financial health.


Often times a credit score is taken as an overall report card on how a person is doing financially. This is not the right way to interpret your credit score. Your credit score does not factor in how much money you make, how much money is in your checking and savings accounts, whether you have a retirement account or whether you have valuable assets like real estate.

This difference is important because lenders factor in many of these other pieces of information into their decisions. So if your score is low, a lender might use other information to determine whether to approve you for a loan and at what terms.

Secondly, understand that your credit score is not a reflection on whether your overall financial picture is good or bad. Rather, when it comes to models like VantageScore, it is a reflection of what information resides in your credit file.

Banks and Credit Unions Usher in Era of Personal Financial Empowerment as Consumer Credit Scores Become Even More Accessible

More than half of U.S. consumers view their credit score at least monthly, with 87% receiving such updates at no cost. A recent study from Javelin Strategy & Research commissioned by TransUnion (NYSE: TRU) found that the majority of these consumers review their credit data through free services provided by their banks or credit unions, a practice that has ushered in an era of personal financial empowerment.

The positive impact viewing one’s credit score has on overall financial health is real. The Javelin study found that 71% of consumers who check their scores at least once a month perceive that they have control over their day-to-day finances, compared with the roughly 54% of consumers who never check their score.

“Credit reports and scores have evolved into one of the most accessible, powerful and popular ways for Americans to build an awareness and an understanding of their creditworthiness, gain financial confidence and protect their personal identities and financial assets,” said Austin Kilgore, Javelin’s Director, Digital Lending. “The U.S. model serves as a case study of how laws broadening access to credit information created greater consumer literacy and inclusion, strengthened the lending ecosystem and made credit markets more robust.”

In an effort to empower their customers to take more control of their credit, banks, credit unions and other organizations have been offering their customers access to white labeled versions of TransUnion’s CreditView Dashboard®. The dashboard is often used as an engagement, retention and marketing tool to provide customers with educational content and access to their personal credit information.

Proprietary TransUnion data confirms the assertion that checking one’s credit score can lead to more positive credit behavior. Nearly one in five consumers (19%) who enrolled and utilized the CreditView Dashboard at least once saw their scores improve 40+ points during 2018. This is compared with 13% of consumers of those same financial institutions that offer CreditView Dashboard, but do not take advantage of it.

Furthermore, more than one-third of subprime consumers (34%) who monitored their credit between March 2018 and March 2019 were able to increase their credit score to a near prime or above credit risk tier. This percentage dropped nearly in half to 18% for those consumers who did not monitor their credit in the same timeframe.

“Financial institutions offering information about their customers’ credit scores and other credit education services are providing invaluable information to them, empowering engaged consumers who are working on their financial resumes,” said Amy Thomann, head of consumer credit education at TransUnion. “Building a healthy financial resume affords many consumers the freedom and flexibility to access the opportunities they deserve.”

The Javelin study found that consumers who check their credit scores monthly express more confidence that they:

  • Maintain control over their financial lives
  • Could absorb a financial shock
  • Will achieve the financial freedom necessary to enjoy life
  • Are on track to meet long-term financial goals
  • Can set aside money regularly to pay large periodic bills

Additionally, the study determined that more than half of consumers using a credit monitoring service say they do so to remain vigilant and protect themselves against identity fraud.

Nearly half (48%) of consumers with prime credit scores check their credit data to see where they stand vs. 21% of consumers in the subprime population. That said, 19% of consumers with subprime scores access their data before applying for loans compared to just 7% for prime. Similarly, 16% of subprime consumers access this information to rebuild their credit versus just 6% for prime.  

“Regardless of whether consumers are in the prime or subprime risk categories, it’s clear that they want to use these tools and take control of their financial future. Those consumers that use credit education tools will be the ones that are in the best position to reach whatever their goals may be,” said Thomann. “Ultimately, those institutions that offer services that enable a more trustworthy and mutually beneficial relationship with their customers will be in the best position to succeed.”

Additional details about the Javelin study will be featured in a Feb. 19 webinar sponsored by VantageScore LLC and titled, “How Access to Credit Scores Cultivates Better Borrowers and Safer Lending.” The webinar will be hosted by Javelin, with additional speakers from TransUnion and VantageScore.

Financial institutions and other company representatives interested in learning more about the provision of broad consumer access to credit scores, and how it can improve their customers’ credit health and prepare them for future opportunities, should register for the webinar here.

Experian’s Annual State of Credit Report

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

As consumers prepare for the next decade, Experian looked at how we’re rounding out this year. The results? The average American credit score is 682, an eight-year high.

Experian released the 10th annual state of credit report, which provides a comprehensive look at the credit performance of consumers across America by highlighting consumer credit scores and borrowing behaviors.

And while the data is spliced to show men vs. women, as well as provides commentary at the state and generational level, the overarching trend is up. Even with the next anticipated economic correction often top of mind for financial institutions, businesses and consumers alike, 2019 was a year marked by more access, more spending and decreasing delinquencies. Things are looking up.

“We are seeing a promising trend in terms of how Americans are managing their credit as we head into a new decade with average credit scores increasing two points since 2018 to 682 – the highest we’ve seen since 2011,” said Shannon Lois, Senior Vice President and Head of EAS, Analytics, Consulting & Operations for Experian Decision Analytics. “Average credit card balances and debt are up year over year, yet utilization rates remain consistent at 30 percent, indicating consumers are using credit as a financial tool and managing their debts responsibly.”

In the scope of the credit score battle of the sexes, women have a four-point lead over men with an average credit score of 686 compared to 682. Their lead is a continued trend since 2017 where they’ve bested their male counterparts. According to the report, while men carry more non-mortgage and mortgage debt than women, women have more credit cards and retail cards (albeit they carry lower balances).

Generationally, Generations X, Y and Z tend to carry more debt, including mortgage, non-mortgage, credit card and retail card, than older generations with higher delinquency and utilization rates.

Segmented by state and gender, Minnesota had the highest credit scores for both men and women, while Mississippi was the state with the lowest average credit score for females and Louisiana was the lowest average credit score state for males.

As we round out the decade and head full-force into 2020, we can reflect on the changes in the past year alone that are helping consumers improve their financial health. Just to name a few:

  • Experian launched Experian BoostTM in March, allowing millions of consumers to add positive payment history directly to their credit file for an opportunity to instantly increase their credit score. Since then, there has been over 13 million points boosted across America.
  • Experian LiftTM was launched in November, designed to help credit invisible and thin-file consumers gain access to fair and affordable credit.
  • Long-standing commitments to consumer education, including the Ask Experian Blog and volunteer work by Experian’s Education Ambassadors, continue to offer assistance to the community and help consumers better understand their financial actions.

From what we can tell, this is just the beginning.

“Understanding the factors that influence their overall credit profile can help consumers improve and maintain their financial health,” said Rod Griffin, Experian’s director of consumer education and awareness. “Credit can be used as a financial tool. Through this report, we hope to provide insights that will help consumers make more informed decisions about credit use as we prepare to head into a new decade.”

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5 Questions with LendingTree

Tendayi Kapfidze is Chief Economist at LendingTree. He leads the company’s analysis of the U.S. economy with a focus on housing and mortgage market trends. Tendayi utilizes data analysis to be a resource for both consumers and trade media, providing actionable insights to help consumers make informed financial decisions.

1) LendingTree’s latest Mortgage Comparison Shopping Report geographically measured potential savings for mortgage shoppers by state and city. What are some surprising findings you found from the analysis?

Nothing surprising in the analysis, rather, its surprising how little people take advantage of the opportunity to save by comparing rates. This is especially notable in purchase transactions. In a refinance, the goal is often more clearly to get a lower rate whereas for purchase, the mortgage is a secondary or complementary product to the house. Homebuyers pay less attraction to the rate and are more focused on getting approved and getting their offer for the house accepted.

2) Where do you see most LendingTree users comparison shop on your site – mortgage, auto, personal, etc? And what are the broader implications of consumer purchasing interests this past year based on those searches?

All consumers on our sites have the opportunity to comparison shop for the product they are seeking. Search volume in mortgage correlates well to interest rates, so lower interest rates have been driving volume recently. Other products have seasonality in the calendar year based on other economic factors. For example, auto loan and insurance picks up from February through March, this aligns with the tax season as many buyers utilize the refund for down payments. Students loans peak at the end of summer into early fall.

3) From understanding newlywed financial woes to the best places to live for singles, LendingTree seems to be tapped into the consumer fiscal mindset. Any trends you foresee this decade when it comes to consumer financial savviness? 

There is growing awareness of the importance of financial literacy in general, which is a welcome trend. Governments, non-profits and the private sector are all increasing the resources available to consumers. Behavioral economics is adding insights that help overcome some of the psychological barriers to good personal financial management. So we anticipate improved consumer financial management for most consumers.

4) With a potential Recession looming this year, do you expect many consumers to re-finance their mortgages?

Refinances are booming given low interest rates. A recession can actually create more refinance opportunity as treasury rates, which drive mortgage rates, would fall. It’s important to note that a recession is not our base case expectation, but as the year has already shown with Iran and the coronavirus, we live in a risky world. An economy growing at just 2% can easily succumb to an exogenous shock.

5) Unlike other credit monitoring apps, the LendingTree Mobile app has a holistic approach to helping consumers grasp their long-term financial health by taking into account other factors such as savings, DTI, budget, etc. Why do you think it’s important to take into account more than just your credit score when it comes to financial planning?

A credit score is just one aspect of financial health. People with the same score can have vastly different incomes, assets and liabilities. Financial security is about having a holistic view of your financial profile and making a comprehensive plan to stay on track for your personal and life goals. Ultimately, its about peace of mind and we believe our app, by keeping track of a multitude of relevant financial metrics and suggesting areas of improvement, is a valuable tool in everyone’s personal finance arsenal.

Valued partners:
VantageScore Licensees:
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