ATLANTA-Concerns about the volatility in the marketplace led the people behind the VantageScore algorithm to develop its newest model, the head of VantageScore Solutions said in an interview during the Mortgage Bankers Association's annual convention here.
VantageScore 2.0 takes advantage of the 45 million consumer files the company has access to, explained Barrett Burns, VantageScore Solutions president and chief executive.
The new model was built using a development sample compiled from two performance timeframes, 2006 to 2008 and 2007 to 2009, with each timeframe contributing 50% of the sample, thus reflecting more recent credit conditions.
However, he added, it still uses the same core algorithm that the original VantageScore model had.
According to Burns, the new model's predictive ability has a 6% performance improvement for new accounts and an 8% improvement for existing accounts over the scores generated by the credit reporting companies own algorithms for the real estate industry.
When compared to VantageScore 1.0, the performance improvement is 7% for new accounts and 6% for existing accounts for the real estate industry.
A change from the previous version is that because of customer requests as well as federal law, the new model dos allow for authorized users.
Using multiple performance windows reduces the model's sensitivity to highly volatile behavior in a single timeframe, explained Sarah Davies, senior vice president of product management, analytics and research for VantageScore Solutions, in a statement from the company.
Lenders can contact any of the three repositories to begin testing VantageScore 2.0, which will be available for use by January 2011.
VantageScore is currently available directly to consumers from Experian and TransUnion. Those companies will create their own timelines individually regarding the availability of VantageScore 2.0 for consumers.
The three repositories created VantageScore, Burns noted, and they designed it to take out the variances between them. They each define data differently and this algorithm provides a common way to compare the information. The intellectual property rights to VantageScore are held by VantageScore Solutions.
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