Chapter 5: Credit Scoring
IN THIS LESSON
Note: Scores can be delivered in both the online and offline environments. Please confirm that the score is available on the Market Reveal platform, as some scores are not available in Market Reveal.
-
History
Before credit scores, credit was evaluated using credit reports from credit bureaus. During the late 1950s, banks started using computerized credit scoring to redefine creditworthiness as abstract statistical risk.
The Equal Credit Opportunity Act banned denying credit on gender or marital status in 1974, along with race, nationality, religion, age, or receipt of public assistance in 1976. Credit scoring adoption accelerated to shield against discrimination lawsuits.
During the 1970s and 80s, the credit reporting industry relentlessly consolidated and moved aggressively into prescreening. The FICO score burst into public consciousness in 1995 when Freddie Mac had lenders use credit scoring for all new mortgage applications.
Resources
Royalties paid by repositories
Any score built by a third party, such as FICO, requires the bureaus to pay a royalty fee. Fees may vary.FICO Open Access
FICO Score Open Access empowers you to share FICO® Scores you already use for account risk management decisions with your customers – with no additional score fees charged by FICO. Through FICO Score Open Access, you provide your customers with their FICO Scores, empowerment tools, and credit education through multiple channels and at varying frequencies.
-
In 2006, to try to win business away from FICO, the three major credit-reporting agencies introduced VantageScore credit score, which differs from FICO in several ways.
According to court documents filed in the FICO v. VantageScore federal lawsuit, the VantageScore market share was less than 6% in 2006. The VantageScore methodology initially produced a score range from 501 to 990 (VantageScore 1.0 score and VantageScore 2.0 score), but VantageScore 3.0 score adopted the score range of 300–850 in 2013.
The VantageScore 4.0 score was released in mid-2017 and also used a range of 300–850. Consumers can get free VantageScores from free credit report websites and from some credit cards issued by Capital One, American Express, U.S. Bank, Chase Bank, TD Bank, N.A., Synchrony Bank, and USAA Bank.
The VantageScore 3.0 and 4.0
lower than 550 is very poor
550–649 is poor
650–699 is fair
700–749 is good
750–850 is excellent
-
Bankruptcy Navigator Index (BNI) 5.0 is a Fair Credit Reporting Act scoring model that predicts the likelihood that a consumer will file for bankruptcy within the following 24 months. This product utilizes a powerful combination of market-leading Equifax consumer credit data and reliable predictive analytics to generate a score for each consumer.
This score allows you to independently evaluate bankruptcy risk, which can help mitigate losses and improve your portfolio performance.
-
Better understand risk at every stage of the consumer lifecycle, from marketing and segmentation to account management and portfolio assessment. Consumer IncomeView combines multiple attribute data sets with the power of machine learning techniques to improve the accuracy of consumer income estimation.
Consumer IncomeView is used across multiple industries during various stages of the consumer lifecycle: prospecting, customer acquisition, account management, and debt management.
-
Insight Score for Retail Banking leverages relevant non-traditional data to assess DDA risk and provides a more comprehensive view of a consumer's financial obligations.
By combining proprietary credit sources and powerful alternative data that no other provider has access to - data that includes payment history in the utility, pay TV, wireline, and wireless communications sectors - Insight Score for Retail Banking delivers fresh, unique visibility into consumer DDA risk.
-
Personal loans are more popular than ever. Despite this, many lenders still have trouble attracting customers with the most competitive offers. Financial institutions must extend credit offers to more applicants with greater confidence to remain competitive.
Insight Score for Personal Loans provides greater predictive power helping you expand markets, increase conversion rates and better serve your customers.
-
Insight Score for Auto combines proprietary Equifax credit data with telecom and utility data not available through other third-party providers.
The Insight Score uses NeuroDecision® Technology to apply industry-specific models and help predict the likelihood of a consumer becoming 90 days past due (or worse) within 24 months of opening an auto loan.
Key Benefits
Evaluate new auto loan applicants with greater confidence.
Uncover new prospects among no file, thin file, and unbanked consumers.
Adjust credit levels among current customers based on a more complete view of their payment histories and behavior.
-
OneScore from Equifax is a powerful, multi-data risk score that leverages differentiated alternative data, including telco, pay TV, and utility data and specialty finance data. It can b used as a standalone score or combined with traditional consumer credit data for even better performance,
Powered by advanced analytics and machine learning, OneScore helps you score more consumers, intelligently grow your customer case, and make your portfolio more profitable.
