VantageScore Solutions, LLC, developer of the VantageScore®
credit scoring model, today announced the third quarter 2017 update
to its Default Risk Index (DRI) data series. This latest update
marks exactly five years of DRI data, demonstrating a sustained
trend across asset classes in which origination volumes generally
increased while the risk profile of those originations became more
conservative. In the third quarter, for example, student lenders
originated the highest quarterly volume of loans in five years
while the average default risk of those new originations was only
72 percent of the risk taken during the same quarter five years
ago.
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 latest update 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:
CATEGORY
TOTALORIGINATIONS
TOTALORIGINATIONSVS. LASTQUARTER
TOTALORIGINATIONSVS. SAMEQUARTER
LASTYEAR
PROBABILITYOF DEFAULT
(WEIGHTED)
DEFAULTRISKINDEX
DRI VS.LASTQUARTER
DRI VS.SAMEQUARTERLAST YEAR
Auto 160,979,112,224 1.2%
- 1.5% 3.87 87.8 - 3.7%
-3.6% Bankcard 88,117,522,011
3.2% - 9.20% 2.74
97.6 - 3.5% -2.9% Mortgage
424,323,804,842 3.4% - 6%
1.08 93.5 2.3%
1.3% Student 49,334,949,179 108.4%
2% 14.92 72.1
- 19% -2.1%
INDEXThe third quarter marks exactly five years of data
provided by the DRI. Since Q3 2013, the risk profile of each asset
class has generally tightened. Student lending was the tightest
category in 2017 with a record-low DRI of 72.1.1
SNAPSHOTThe risk profile of new auto loans and bankcards
tightened very slightly as compared to last quarter. Student loans
tightened from 90 to 72.1 while volumes more than doubled,
continuing a seasonal theme that plays out each year in the third
quarter. Only mortgage loans showed both a slight increase in risk
and a slight increase in originations.
ORIGINATIONSStudent loan origination volumes increased
dramatically in the third quarter, more than doubling its volume
from the previous quarter to $49 million. Although an increase in
student lending is typical in the 3rd quarter of every year, this
particular 3rd quarter represented the highest quarterly volume in
all five years of the DRI. All other major loan categories (auto,
bankcard, mortgage), saw a slight increase in loan originations
from the last quarter.
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 fall 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
creditworthiness. In fact, a recent study found that more than 8.5
billion VantageScore credit scores were used in June 2016-July 2017
by over 2,700 unique users. Of those, over 6 billion scores were
used by more than 2,200 lenders of all sizes in their lending
processes and over one billion VantageScore credit scores were
provided directly to consumers through dozens of websites and
lenders who provide their users and customers with their credit
scores for free. 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.
* 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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version on businesswire.com: http://www.businesswire.com/news/home/20180222005542/en/
VantageScore Solutions, LLCJeff Richardson, 203-363-2170Vice
President, Group Head Marketing
Communicationsjeffrichardson@vantagescore.com