Search VantageScore.com

INDUSTRIES WE SERVE

Bankcard

[thumbnail]

The Role of Credit Scores in Consumer Loan Securitization

Misinterpretation of credit scores and the risk they measure in pools of consumer loans can lead to inaccurate forecasts of performance for securtites based on those loans. This paper explains how to avoid such misinterpretation, through understanding of scores’ relationships with probability of default (PD) values.

Secondary Market for the Bankcard Industry

Gauge risk accurately in securitizations

Using the most predictive credit scoring model available enhances the quality of disclosures on securitized loans, including card-loan portfolios. VantageScore has earned the trust of leading lenders, securities issuers, and ratings agencies. In 2015, both Standard & Poor’s and Kroll Bond Rating Agency rated pools of consumer loans underwritten using VantageScore credit scores without bias.

In addition, the VantageScore team maintains a regular dialogue with ratings agencies and regulators and is actively involved with the Structured Finance Industry Group (SFIG).

Nevertheless, the role of credit scores in the securitization process is too often misunderstood, by both securities issuers and investors. Failure to understand how the relationship between credit scores and probability of default (PD) shifts over time can lead to major mischaracterizations of portfolio risk. VantageScore Solutions is dedicated to correcting misperceptions and promoting best practices in this arena.

 

Additional resources

THE SCORE
Inside the latest issue
LATEST ISSUES:
November 2018
October 2018
September 2018
August 2018
July 2018
June 2018
BACK TO TOP
Valued partners:
CBA MBA
VantageScore Licensees:
Equifax Experian TransUnion