- VantageScore launched its newest credit scoring model, the VantageScore 4plus.
- The score combines consumer-permissioned open banking data with data from Experian, Equifax, or TransUnion to improve lenders’ underwriting efforts.
- The new credit scoring model is available as a pilot for banks, fintechs, and government lenders.
Consumer credit score software company VantageScore unveiled VantageScore 4plus, its newest credit scoring model, today.
VantageScore 4plus leverages alternative data sourced through open banking that can be accessed via all major aggregator APIs. When consumers offer lenders access to their bank data, the lender can combine the data with traditional credit scoring information from Experian, Equifax, or TransUnion to make more informed underwriting decisions and potentially lend to more consumers who have thin credit files but demonstrate positive cash management.
“The use of consumer-permissioned bank account data is a huge step forward in creating a credit score that is more predictive and reflective of a consumer’s full financial profile, helping them build their credit and gain access to mainstream financial products,” said Credit Builders Alliance CEO Dara Duguay.
This new credit scoring model is available as a pilot for banks, fintechs, and government lenders. Because it uses the same 300 to 850 scoring range with aligned score-to-odds ratios as VantageScore 4.0, most lenders won’t need to adjust their credit or lending policies to use the new VantageScore 4plus credit score. And because the new score leverages real-time data, lenders will be able to view a consumer’s credit score adjustment within seconds, facilitating faster lending decisions.
The additional data from VantageScore 4plus not only helps lenders make informed decisions about new borrowers, but it also helps lenders identify existing borrowers whose habits have changed. The new score provides visibility into signs of financial distress months before the trouble is detected by traditional credit bureaus. which is critical in the current economic uncertainty.
“By harnessing the power of alternative open banking data, VantageScore 4plus is ushering in a new era of consumer credit scoring that is transformational for lenders,” said VantageScore President and CEO Silvio Tavares. “As the fastest growing credit scoring company in the U.S., with over 42% growth in 2023 and 27 billion credit scores used per year, lenders are recognizing the innovation and predictive power of VantageScore credit scores.”
The news comes shortly after Experian launched Cashflow Attributes, a tool also powered by open banking and consumer-permissioned data, that aims to offer lenders more data about underserved consumers.
Connecticut-based VantageScore was founded in 2006 as an independently managed joint venture of the U.S.’ three Nationwide Consumer Reporting Agencies (NCRAs) – Equifax, Experian and TransUnion. The company, which is committed to financial inclusion, saw the usage of its VantageScore increase by 42% in 2023, when it reported more than 27 billion credit scores. VantageScore helps 3,400+ institutions, including eight of the top 10 banks, to use the VantageScore credit score to underwrite credit cards, auto loans, personal loans, and mortgages.
Finovate’s David Penn interviewed Rikard Bandebo, VantageScore Executive Vice President and Chief Product Officer on the company’s approach to credit scoring in 2022.
Photo by Mike Hindle on Unsplash