VantageScore Keeping the Heat on FICO

This week both Experian and TransUnion announced the availability of VantageScore 2.0.  The VantageScore, owned by VantageScore Solutions, LLC, is the FICO score’s closest competitor in the credit bureau based scoring model space.  VantageScore Solutions, a joint venture of the three credit reporting agencies, was formed in 2006.  The score itself is marketed and distributed by the three national credit reporting agencies; Equifax, Experian and TransUnion.

According to an Experian press release and the VantageScore website, the development sample (the sample of credit reports used to develop and redevelop a credit scoring model) used to build 2.0 was split 50/50 over two different time frames, 2006-2008 and 2007-2009.  The earlier of the two time frames is generally referred to as the observation date and the later is referred to as the performance date.  There were 15 million credit files in the sample used to develop the model.

It’s unknown whether or not FICO has lost significant market share to the VantageScore.  According to the aforementioned Experian press release Chase has replaced the FICO score with Vantage for “certain usage” and this is referred to under the heading “Experian advances new model and first lender adopts.”  According to the Memorandum Opinion and Order filed in the FICO v VantageScore lawsuit on July 24, 2009 “…VantageScore has been on the market for three years and has garnered only 5.7% of the credit scoring market while Fair Isaac’s dominant position has experienced very little change.”  This, however, could have changed because it’s been 18 months since the Order was filed and FICO’s suit against VantageScore was subsequently dismissed.

When asked for comment Careen Foster, FICO’s Product Director, had this to say…

“FICO has a long history of innovation. In keeping with that tradition, we continue to take on the “hard problems” and break new ground in the area of predictive analytics, investing in the development of technology and techniques that give our customers a consistent and trusted level of clarity in a constantly-changing world. For example, validations of the FICO® 8 Score on 2008-2010 data by major U.S. lenders indicate three-to-five times the improvement in risk prediction typically associated with an enhanced scoring model. That translates into significant value and is why leading lenders around the world continue to rely on FICO, generating more than 10 billion FICO® Scores every year, to protect and grow a profitable balance sheet, including their largest and highest value portfolios.” 

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit contributor for Mint.com, and the author of the “credit rating” definition on Wikipedia.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  He has served as a credit expert witness in more than 70 cases and has been qualified to testify in both Federal and State court on the topic of consumer credit.

Categorised in: Credit Score

This post was written by John Ulzheimer