VantageScore’s Top Five Most Popular Questions at NAFCU’s Annual Conference

Credit Scoring with VantageScoreWritten by Jeff Richardson
Vice President, Communications and Public Relations

NAFCU members aren’t exactly known for being shy or reserved.  So you can imagine how many questions I fielded about credit scoring, both during my breakout session presentation and while chatting with conference participants in VantageScore’s networking lounge during NAFCU’s Annual Conference and Solutions Expo in Montréal, Canada last month.

Because some of the questions during the conference were particularly popular, I thought it might be helpful to compile and share the five most common questions that came my way. Here are those questions and related answers, presented in no particular order.

1. How does the VantageScore® credit scoring model help credit unions grow?

One of the key differentiators of the VantageScore® model is its ability to score more of your credit union members. Your lending portfolio will benefit from capturing the widest possible base of qualified and relevant prospects within your target demographics and risk strategy, without having to relax credit standards to attract more members.

Traditional credit scoring models limit your lending universe to a smaller percentage of qualified U.S. adults than the lending population available with the VantageScore® 3.0 model. The VantageScore® 3.0 model gives lenders, like your credit union, access to 30-35 million consumers who are invisible to traditional credit scoring models. That’s a group larger than the population of Texas!

  • VantageScore® 3.0 credit scoring modelThe model expands the lending universe by using broader and deeper credit file data and more advanced modeling techniques that capture unique consumer behaviors more accurately.
  • Nearly 25% of these newly scoreable consumers are actually prime or near-prime credit quality—excellent candidates for mainstream lending products.

A terrific infographic that provides a more detailed explanation is available on our website.

2. Why does your member’s credit score go down after he/she opens a new credit account?

One of the characteristics that contribute to the calculation of a VantageScore® credit score is opening a new credit card account. This is far less influential than the main factors that affect a score, such as missing payments or maxing out a credit card account, but it does have an impact.

A small drop in a person’s credit score is possible after opening a new credit card because that new account represents new risk of potential overextension, with no available history to demonstrate that the consumer can effectively manage the new account. Applying for a new account also likely involved a credit inquiry with one or more of the three credit reporting companies (CRCs: Equifax, Experian, or TransUnion). That inquiry is also likely to cause a slight drop in an individual’s score.

As long as your member doesn’t max out the credit card or miss any payments on the new account (or any others), the member’s score should return to its previous level in about three months.

3. Who uses the VantageScore® model?

Nearly one billion VantageScore ® credit scores were used in 2014, by over 2,000 lenders and other industry participants, including 6 of the 10 largest banks. In that same vein, credit unions should know that the National Credit Union Administration (NCUA) recognizes the VantageScore® model, and there are no regulatory hurdles for credit unions that want to take advantage of the model.

4. How can our credit union switch to VantageScore®?

The VantageScore ® model is marketed and sold exclusively through licensing arrangements with the three major CRCs (Equifax, Experian and TransUnion). Your credit union likely already has a relationship with one or more of these companies and can obtain more information about VantageScore® through your CRC representative. Get contact information for the three CRCs on our website.

5. Did I win the VantageScore® Drone Giveaway?

VantageScore's DJI Phantom 2 VISION GiveawayVantageScore’s giveaway of the DJI Phantom 2 Vision personal drone generated almost as much attention as our presentation session. Inspired by our company tagline, “A Higher Level of Confidence,” the high-flying prize was a constant object of curiosity – and longing by conference attendees.

Thanks to all who submitted a business card or had their badge scanned for a chance to win. You’re all winners in our book, but only one lucky NAFCU Annual Conference attendee could take home the drone. Congrats to credit union attendee Michael O. who is the new owner of a DJI Phantom 2 VISION!

It was a real pleasure meeting you all at the conference. And, if you want to connect with VantageScore® further, sign up for our e-newsletter The Score, and follow us on Twitter: @VantageScore®In the meantime: À l’année prochaine (Until next year)!

Download your copy of the free white paperMaximizing the Credit Universe” to get valuable insights into ways to revise current strategies to manage risk, while expanding the ‘credit accessible universe.’

VantageScore LogoVantageScore Solutions, LLC is NAFCU Services Preferred Partner for credit scoring. For more information on VantageScore’s products and services, visit www.nafcu.org/vantagescore.

New Study Highlights Need For Increased Credit Literacy

Originally posted on CUInsight.

By Randy Salser, President, NAFCU Services

As the availability of credit reports has become more convenient due to the pervasiveness of the Internet, knowledge of credit scoring still suffers. The National Credit Score Knowledge Survey results were released this month by the Consumer Federation of America (CFA) and VantageScore Solutions.  Among the surprising findings in the study:

  • While 80% of respondents consider their knowledge of credit scores to be good, fair, or excellent—94% of participants do not know which factors are among those used to calculate a credit score
  • Only 7% know that neither FICO nor VantageScore will lower one’s credit score if multiple inquiries are made during the same two-week window
  • Only 50% of respondents understand the three instances when lenders are required to inform borrowers of the credit score used in the lending decision
  • 53% of millennials surveyed don’t know that age is not used in calculating credit scores
  • Only 50% of millennials surveyed know that credit repair companies are rarely helpful in fixing credit scores
  • 51% of millennials surveyed have not obtained a free copy of their credit report, while 74% of older adults have obtained a free copy of their credit report

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Who Are “The Unscoreables”? Hint: It’s Not Who You Think

Shortly before the NAFCU annual conference, David Frankil (who needs no introduction to readers of this blog), wrote a post titled, “Is Your Credit Union’s Lending Universe Expanding?”

David’s post was a terrific explanation of how important it is for credit unions to expand their borrower pools in order to keep ahead in an increasingly competitive consumer credit market.

A basic requirement for that expansion is a credit score, which needs a history of credit usage. Some credit score models require very recent credit usage, such as activity on at least one account at some point within the last six months, in order to generate a score. In other words, whether a member has one credit account (e.g., a credit card) or many credit accounts, if there isn’t any activity on at least one account during the most recent six months, that member may be invisible to you when they seek new credit; the credit score model may not recognize their credit history over the past six months and thus may be unscoreable.

Members who are new to the credit market such as recent high school or college graduates, divorced or widowed members or newly arriving immigrants have similar challenges obtaining a credit score for a different reason. Consumers cannot receive a credit score under some traditional models until after six months of reported payment history.

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Is Your Credit Union’s Lending Universe Expanding?

Originally published on CUinsight.com.

No, this is not a survey to see who the Trekkies are among us, nor is it an analysis of what the Higgs-Boson particle means for banking.

You can certainly grow the pool of lending opportunity by adding new members, but a component of any lending strategy has to be doing more lending to existing members. There are many factors which can dictate segmentation of and the ability to expand further into your target markets, including demographics, income levels, credit scores, and others. Some are exogenous, i.e. outside of your control.

Demographics are one example – your member’s age is your member’s age, and nothing you can do is going to change that fact. The same is true for income levels – they earn what they earn, and unless you’re going to send them checks every month that isn’t going to change either.

On one level that is also true for their credit scores. Their credit related activities are interpreted in order to generate a score that you use to help assess credit-worthiness, and improvements in that score are really dependent on behavior changes and other actions taken by the member.

But a closer look reveals that there are some things you can do related to your usage of credit scoring models that can help expand your universe of opportunities.  One of the common issues associated with some traditional credit score models relates to their methodology, and what they include and exclude to generate the score. I’m sure that all of you at one time or another have had to say no to someone you knew was a good credit risk, all because their score did not meet minimum underwriting requirements.

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