Credit reporting companies are scrambling to promote how their models will help lenders better predict the likelihood of default — though one company is playing the bureaus against each other to boost borrower credit scores. One new credit offering claims it will save mortgage lenders $1 billion, while another helps prevent mortgage fraud.
Advantage Credit International reported last month that credit bureau alternative scoring models return a higher credit score 72 percent of the time. The Pensacola, Fla.-based firm said its new ScoreChoice enables originators to order six bureau scores instead of just three.
Advantage said it compared the frequency with which alternative scoring models turned out a higher score than traditional models. Alternative models TransUnion, Empirica95 and Empirica98 were more often higher than Empirica04 — TransUnion’s default scoring model.
“Although credit bureaus scores are derived from the Fair Isaac Risk Model, the three repositories further calculate a borrower’s credit score using their own proprietary computation models,” Advantage said. “Each model has a trademarked name and they differ in what they mean to predict, the statistical methods used to determine a creditworthiness score, what data is used and how they are weighted. A bureau will often have two or three models for scoring mortgage reports.”
Fair Isaac Corp., which earlier this month re-branded itself as FICO, debuted last week FICO Score Trends, a new subscription service that enables lenders to regularly analyze their portfolios and drill down into a range of criteria including industry, geography and time period. The service was previously available only under a custom arrangement.
Experian terminated its relationship with Fair Isaac’s myFICO.com following FICO’s still-active 2006 lawsuit against the three major credit repositories over their competing VantageScore, the Washington Post reported last month. The move will reportedly prevent consumers from accessing the FICO score through Experian.
But then FICO announced earlier this month that it teamed up with Equifax to introduce BEACON Mortgage Score. The new offering, which will be available next month, was specifically designed for mortgage credit analysis and improves upon the accuracy of the traditional BEACON score by 25 percent.
“FICO scientists have developed a version of the BEACON score with significantly greater power for assessing mortgage repayment risk,” the statement said. “Early results suggest that the use of BEACON Mortgage Score by the industry potentially can save it $1 billion in foreclosure costs.”
VantageScore Solutions, LLC, reported that it analyzed 600,000 randomly selected 2001- and 2002-vintage originations that are still outstanding. A review of the performance of the loans during the five years after they were originated determined that three-quarters of the loans ranked by VantageScore performed consistently better than the top 75 percent ranked by the benchmark score. The bottom 25 percent ranked by VantageScore had a consistently higher delinquency rate than those ranked by the benchmark score.
FICO recently announced an agreement with the Pennsylvania State Employees Credit Union to provide free FICO scores to its 200,000 members, a news release last week.
In January, FICO announced that TransUnion became the first credit reporting company to offer FICO Risk Score, Classic 08. The new model is expected to double the predictive capability of the credit score.
The new score maintains a scoring range of 300 to 850, score reason codes and minimum scoring criteria. Inquiries are treated no differently than in the prior version. But Classic 08 reduces the impact from piggybacking — where borrowers are added on as authorized users of someone else’s account to artificially boost their credit scores.
Informative Research said Monday that its reports have been updated in an easier-to-read report format designed to highlight the most critical elements of a borrower’s credit history. Derogatory tradelines and all collection accounts now appear in bold, and the elimination of duplicate entries has reduced the overall report length by as much as 20 percent.
Tri-merged reports from Kroll Factual Data will now include an identity verification product, a March 3 announcement said. FactualID utilizes the borrower’s name, social security number and property address to assesses the risk of identity and occupancy misrepresentation.
A statement Tuesday said Kroll had teamed up with MRG Document Technologies to provide MRG customers with access to Kroll’s risk assessment services — FactualID, FullFacts and CollateralFacts. The services will help lenders prevent mortgage fraud and comply with the Red Flags Rule.
United Fidelity Funding Corp. signed up as a customer of Loan-Score Decisioning Systems, a press release last week said.