SOURCE: VantageScore Solutions, LLC

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December 20, 2017 09:00 ET

Bankcard Lenders Only Consumer Lending Category to Increase Risk Slightly in Q2 2017 Over Previous Quarter

STAMFORD, CT --(Marketwired - December 20, 2017) - VantageScore Solutions, LLC, developer of the VantageScore® credit scoring model, today announced the quarterly update to its Default Risk Index (DRI) data series. The VantageScore DRI tracks the amount of default risk assumed by lenders in four U.S. consumer-loan categories: mortgage, bankcard, auto loans and student loans.

The update, which encompasses lender activity for the second quarter of 2017, is located in interactive infographics at DefaultRiskIndex.com and in a spreadsheet containing the full data series, which is available for download at the site.

Changes to specific index values are summarized in the following table:

VantageScore Default Risk Index: Update Summary, Q2 2017
CATEGORY  TOTAL ORIGINATIONS  TOTAL ORIGINATIONS vs. LAST QUARTER  PROBABILITY OF DEFAULT (weighted avg.)  DEFAULT RISK INDEX  DRI vs. LAST QUARTER  DRI vs. SAME QUARTER LAST YEAR
Auto  $159.09 B  7%  4.02  91.2  -8%  -5%
Bankcard  $85.36 B  -6%  2.84  101.1  4%  3%
Mortgage  $410.56 B  27%  1.06  91.4  -5%  7%
Student  $23.67 B  7%  18.61  90.0  -4%  -4%

The aforementioned update reflects three key points:

  • Default Risk Index: The risk profile of new auto, mortgage, and student loans tightened slightly in the quarter. The DRI for bankcard lenders, however, increased slightly for the second consecutive quarter to 101 (albeit on lower volumes). This is the first time since mid-2006 that the DRI value for any category has passed 100.1
  • Quarterly Snapshot: The second quarter may prove, in hindsight, transitional. Every type of lender either tightened on risk or volume, with only student lenders tightening on both. With reports of consumer delinquencies rising, it will be important to track this trend.
  • Originations: The second quarter was a mixed story for originations. Auto lenders reversed trend and increased volumes 7% versus last quarter. Bankcard lenders, however, continued a slow march to lower volumes. Mortgage originations grew 27% over the prior quarter, but fell shy by 8% of the same quarter last year.

1Each risk profile is indexed to the beginning of the series, where the third quarter of 2013 equals 100. DRI profiles that are close to 100 show an equivalent risk activity to the 2013 benchmark; whereas, DRI profiles that are further from 100 distinguish risk activity that is either higher or lower than the benchmark (depending on the results).

About the Default Risk Index

The VantageScore Default Risk Index (DRI) and its website, DefaultRiskIndex.com, permit users to monitor the shifting quarterly risk profiles of loan originations in the mortgage, credit card, auto, and student loan categories. The DRI is derived using credit file data from TransUnion and VantageScore odds charts -- tables furnished to VantageScore users that match values on the 300-850 VantageScore scale range with their corresponding probability of default (PD) values.

The Default Risk Index is a measure of relative changes in risk level, benchmarked against the third quarter of 2013, the first period for which data were compiled. Interactive tools at DefaultRiskIndex.com allow users to view trends for each loan category and freely download the data behind the charts.

The VantageScore Default Risk Index is provided as a free resource to institutional and individual investors, professionals in the securitization field, academics, and all others interested in systemic lending risk. It will be updated quarterly, with data reflecting loans issued in the preceding quarter.

VantageScore Solutions and TransUnion developed the DRI to highlight limitations in the traditional ways credit scores are used to evaluate risk for categories or pools of loans. Today's common practices -- using "weighted average" or "distribution by score band" to summarize risk -- are mathematically flawed. Reliance on those metrics can result in a miscalculation regarding the true credit quality of a loan pool as well as obscuring meaningful trends and leading a well-intentioned analyst to the wrong conclusions.

About VantageScore Solutions

Credit scores can impact many aspects of your life, everything from whether you are able to get a loan and how much interest you will have to pay to whether you are able to rent an apartment.

VantageScore Solutions, LLC (www.VantageScore.com) is the independently managed company that owns the intellectual property rights to the VantageScore credit scoring models and is the leader in scoring innovation. Recently introduced VantageScore models score 30-35 million consumers* who typically are not scored by conventional models -- without sacrificing predictiveness. VantageScore credit scores are used by lenders, landlords, utility companies, telecom companies, and many others to determine your creditworthiness. By using the VantageScore model, these enterprises have access to many more consumers, and in turn, consumers have greater access to mainstream credit.

While there are many credit scoring models in the industry, the "win-win" for VantageScore is its innovative, highly predictive, patent-protected, tri-bureau scoring methodology that provides lenders and consumers with more consistent credit scores across all three national credit reporting companies. VantageScore is also the model tens of millions of consumers use to monitor their credit behaviors through dozens of websites and lenders who provide their users and customers with their credit scores for free.

The company is celebrating its 12th anniversary in 2018.

* Reduction in public records and collection trade lines in consumers' files will cause the number of consumers who would be newly scoreable using the VantageScore credit scoring model to decline.

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