In a move that could impact auto financing, VantageScore recently announced further steps in supporting consumers affected by medical collection debt.
VantageScore said through a news release that the company completed an extensive analysis of how consumer credit score models are impacted by recent changes to how medical collection accounts are reported, including changes brought about by the COVID-19 pandemic.
Based on the findings, VantageScore made the decision that neither of its most recently introduced scoring models — VantageScore 3.0 and 4.0 — will continue to use this data in the calculation of consumers’ credit scores, regardless of the amount owed or the age of the collection.
According to the news release, VantageScore expects the adjustment to the models will be completed and operational by mid-October.
As a result of this decision, VantageScore estimated consumers with this type of information in their credit files will likely see scores increase by as much as 20 points when either the VantageScore 3.0 or 4.0 models are used.
Impacts to model performance are expected to be minimal for a large segment of the population, according to the analysis.
According to a Consumer Financial Protection Bureau report released on March 1, medical collection accounts appear on 43 million credit reports and approximately 58% of bills that are in collections and on people’s credit records are medical bills as of the second quarter of 2021.
By 2023, 75% of medical collections will be removed and VantageScore said it is taking advantage of the opportunity to reassess the predictive value of using this information in its credit scoring models.
The company went on to say that impact to the VantageScore models’ predictive performance is expected to be minimal for a large segment of the population and both VantageScore 3.0 and 4.0 will continue to rank order effectively.
“Across our credit scoring models, medical collections accounts have minimal impact on the predictiveness of creditworthiness for a large segment of the population. As such, we are making the proactive decision to remove the information from our models entirely,” VantageScore president and chief executive officer Silvio Tavares said. “Our decision reflects VantageScore’s continued effort to offer the most predictive scoring models and to help increase financial inclusion.”
For more information, visit https://vantagescore.com/medical-debt-and-the-changes-to-vantagescore/.
Mark Luber is hitting the ground running as the chief product officer for Equifax United States Information Solutions (USIS).
Just a few days after announcing he joined the company from Cox Automotive, Luber highlighted the newest tool from Equifax; the addition of industry-specific FICO score segmentation data to Equifax weekly U.S. national consumer credit trends reports.
With this integration, Equifax said it is the first organization to offer weekly, industry-specific FICO score segmentation reports to enable businesses across industries to better track anonymized consumer credit trends for potential risks and opportunities.
“Equifax weekly credit trends reports are a powerful example of the benefits of our unique blend of differentiated data, analytics and technology,” Luber said in a news release. “In challenging economic times, data-driven insights can inform decisions necessary to safely move businesses and consumers forward.
With the addition of FICO score segmentation views to our weekly reports, we are providing our business customers with the ability to access near real-time anonymized consumer metrics,” he continued. “Additionally, we are meeting customer demand with the most frequent and comprehensive lender reporting metrics in the industry.”
Credit trends reports utilize Equifax technology and analytics to link and track account-level credit data for the complete Equifax U.S. consumer credit database. Equifax explained the data is derived from trended, anonymous time-series credit data and showcase insights created on consumer trends, behaviors and credit performance across the country.
By adding FICO score segmentation views to weekly credit trends reports, Equifax emphasized that businesses can better anticipate consumer behavior changes as a result of COVID-19 and beyond. The data integration within both portfolio and originations reports can enable them to:
— View near real-time new account opening metrics, including average balance, average credit limit and risk score segmentation.
— Broadly track prime and subprime credit score trends nationally and compare national trends to their own portfolio performance.
— View average prime and subprime FICO scores for new account openings across the U.S. to broadly track risk by product.
— Understand the score profiles of consumers who have outstanding balances or who may be delinquent on account payments.
Officials said FICO score segmentation will be added to the Equifax U.S. National Consumer Credit Trend reports this month.
FICO will be trying to heat up your underwriting capabilities and portfolio performance in the coming months.
This summer, finance companies can take advantage of the new capabilities offered by FICO that will come through its flagship FICO Score and the FICO Score 10 Suite.
The company highlighted the new FICO Score 10 Suite can give finance companies and lenders what FICO called “unparalleled flexibility and predictive power” to make more precise underwriting decisions. The new FICO Score 10 T incorporates trended credit bureau data to further enhance predictive power.
Leveraging the most comprehensive data available, FICO Score 10 and FICO Score 10 T outperform all previous FICO Scores, according to the company.
By adopting the FICO Score 10 Suite, FICO believes a finance company or lender could reduce the number of defaults in their portfolio by as much as 10% among newly originated bankcards and 9% among newly originated auto loans, compared to using FICO Score 9. The reduction in defaults is even higher for newly originated mortgage loans, at 17% compared to the version of the FICO Score used in that industry.
“These improvements in predictive power can help lenders safely avoid unexpected credit risk and better control default rates, while making more competitive credit offers to more consumers,” FICO said in a news release.
The company explained FICO Score 10 can deliver increased predictive power, while preserving the “trusted and proven” FICO Score minimum scoring criteria. Plus, FICO Score 10’s backward compatibility to previous FICO Score versions can ensure continuity, ease of use and stability for finance companies, lenders and investors.
FICO added that finance companies and lenders can more easily transition to FICO Score 10 since it includes standard FICO reason codes, a similar odds-to-score relationship as prior versions and consistent score ranges.
“Clients value the dependability and industry-leading predictive power of the FICO Score,” said Jim Wehmann, executive vice president for scores at FICO. “FICO is a cornerstone for consumer lending decisions.
“We continuously innovate using the latest, most robust data, while maintaining consistency with previous models to ensure backward compatibility and minimize operational changes required to adopt a new score,” Wehmann continued.
To further enhance predictive power, the company reiterated FICO Score 10 T incorporates trended credit bureau data. Different than traditional credit bureau data, FICO explained the use of trended data considers a historical view of data such as account balances for the previous 24 months, giving finance companies and lenders more insight into how individuals are managing their credit.
“Many lenders want to leverage the most comprehensive data possible to make precise lending decisions,” Wehmann said. “By offering a score that taps further into trended data, we’re able to give lenders greater flexibility and predictive power, as well as ease of integration.”
The company pointed out FICO Score is the independent standard measure of consumer credit risk used by finance companies and lenders in more than 90% of all consumer credit decisions in the U.S. and is provided free to consumers through hundreds of finance companies and lenders via the FICO Score Open Access Program.
FICO noted 25 of the largest credit card issuers, 25 of the largest auto-finance companies and tens of thousands of other businesses rely on the FICO Score for their consumer credit risk analysis and federal regulatory compliance.
FICO Score 10 and 10 T provide a precise assessment of consumer credit risk on all credit product lines — mortgages, auto loans, credit cards and personal loans — and can be used across the entire customer credit lifecycle, starting with marketing/pre-screen, originations and account management, all the way through early-stage collections.
For more details, go to www.fico.com.
