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VantageScore: a rival credit score

The third issue was a growing frustration that the scores between the bureaus in many cases were so different. So if you are pulling a tri-bureau score, particularly the mortgage industry, which one do you use? The highest? The lowest? The median? The average? What do you do and how do you explain that to your customer?

QuestionHow is VantageScore different from FICO?

Answer We have one model that spans the three bureaus. When the three companies put their teams together to develop our model, on each of those teams was a person who was an expert in their databases, and they quickly began to realize that the data in the three companies were defined slightly differently -- differently enough to drive a different outcome in scores. So, we went through a process called characteristic leveling. There can be roughly about 500 characteristics in a file, mathematical characteristics. You go through a combination/permutation of deciding which ones are the most predictive, and we found about 195 of those characteristics often were defined differently in the three bureaus. We pulled the data out, redefined them consistently and put them back in.

The scale is different. It's tied to school grades -- you know, A, B, C, D, F. We have letter-graded keys to the scale, and that's for customer education. Scoring is all about rank ordering. It's the population of how millions rank order against the large population of hundreds of millions.

Coming back to how we are different, the reason why we score more people … is because we found there was a lot of data in the file that other model developers were not using. For example, many models don't score for the first six months of credit usage, and they will not score if you haven't used credit for six months. Those two things right there mean new entrants coming in can't get use of their credit for six months, (and) people who are infrequent credit users lose a score after six months of nonusage. There are millions, millions of them. The way I like to say it: They don't get rewarded for having very sensible debt attitudes. A lot of people just don't want to borrow money or just don't use credit, and they should be rewarded for that, and they ought to be able to get a score.

QuestionHow many lenders and what types use VantageScore?

Answer Being a generic credit score, any lender could use it. We score billions of transactions a year. I can't tell you who specifically is using it and the reason for that is antitrust issues or potential antitrust issues. We stay away from selling it. We license the model to the bureaus and they sell it. And because they are competitors, at our board meetings and other meetings we have, we don't discuss who is using it or at what price for two reasons. One, it could have the appearance of collusion; that we are ganging up on other model developers to kick them out of business, which is illegal. The second thing is the three bureaus are so highly competitive, they don't want each other to know in what applications or which parts of the lenders they are being used.

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