Developers of credit score models and users of credit scores should conduct performance validations annually to understand model performance and outputs in relationship to current consumer behavior. Not only does this process provide increased confidence in lending decisions, it can uncover additional opportunities to improve profit and loss ratios.1
While the new VantageScore 3.0 model provides lenders with transformative predictive lift and features many other benefits, there remain lenders who continue to use VantageScore Solutions’ earlier models, VantageScore 1.0 and 2.0.
Unlike other credit score model developers, VantageScore Solutions publicly posts validation results to keep its performance transparent. Highlights from the recently completed 2013 validations of VantageScore 1.0 and VantageScore 2.0 include:
- VantageScore 1.0 outperformed the Credit Reporting Company (CRC) Risk Model in originations (prediction of default, or going 90 days past due, on accounts that were opened during the 24-month period reviewed for the validation) in all industries.
- VantageScore 2.0 outperformed the CRC Risk Model for all industries in account management activities (prediction of default among accounts that were opened prior to the start of the 24-month validation period).
- Score consistency between the three national CRCs is maintained.
- Continued strong rank ordering for all economic quadrants.
- Overall risk levels are being reducing in all major industries.
Overall and within product and issuer subsets, both VantageScore models outperformed the benchmark CRC model in almost all scenarios.
Note on charts below: Each pair of charts compares the performance of the designated VantageScore model at accurately predicting defaults (payments 90 days overdue), against a benchmark model developed by one of the three major Credit Report Companies (CRCs). The chart on the left in each pair depicts performance on account originations (accounts that were opened in the first three-months of the performance period). The chart on the right looks at performance on account management (i.e., on accounts that were at least two years old at the time of performance measurement).
VantageScore 1.0 Performance Benchmarking:
VantageScore 2.0 Performance Benchmarking:
Visit the Research Studies page at VantageScore.com for additional performance metrics, other validation results, and information on how to conduct validations.