Unlocking New Opportunities: The Power of VantageScore 4.0 for Lenders

Highlights: 

• VantageScore® 4.0 expands lending opportunities by incorporating trended and alternative credit data, allowing for more inclusive and accurate risk assessments.

• This model enables lenders to access many previously unscorable U.S. adults, many of whom are creditworthy, and offers cost efficiencies through reduced pricing and free score offerings from Equifax.

In the ever-evolving landscape of credit and lending, staying ahead means embracing innovation that expands access and refines risk assessment. For decades, the credit scoring industry was largely dominated by a single player, particularly in the critical mortgage sector. 

However, a significant shift is underway, ushering in an era of greater competition and more nuanced financial evaluation. At the forefront of this change is VantageScore® 4.0, a tri-bureau credit scoring model from VantageScore that is redefining how lenders and institutions assess creditworthiness and unlock new opportunities.

What is VantageScore 4.0?

VantageScore® 4.0 stands out as the first tri-bureau credit-scoring model to incorporate both trended credit data and alternative credit data. This is a monumental leap forward from traditional models that primarily rely on static, point-in-time snapshots of credit history.

• Trended Credit Data: Imagine understanding not just what a borrower's credit utilization is today, but how it has changed over months and years. Trended data provides this historical context, offering a more dynamic view of a borrower's payment behavior, credit utilization, and balances over time. 

• Alternative Credit Data: This crucial component includes payment histories for essentials like rental, utilities, and telecommunications. For millions of Americans, these consistent payments are a strong indicator of financial reliability, yet they have historically been excluded from conventional credit scores. 

When combined, these deeper insights can enable lenders to both more inclusively and more accurately assess applicants and offer more competitive rates and terms to qualified borrowers as they have a more complete understanding of their financial situation and responsibility.

Expanding the Scorable Universe: A Game Changer

One of the most profound impacts of VantageScore® 4.0 is its ability to score more U.S. adults who were previously overlooked by other conventional models, including renters and lower-income individuals. These "credit invisible” consumers often lack the credit history or recent credit file updates required by older models.

This expansion is not about relaxing lending standards; it's about utilizing advanced machine learning techniques and a richer dataset to identify creditworthy individuals who were previously overlooked. Importantly, many of these newly scorable consumers have scores of 620 and above, making them potentially eligible for mainstream credit products like conventional mortgages, auto loans, and personal loans. This opens up vast new markets for lenders and provides critical access to credit for deserving consumers. 

Driving Competition and Lowering Costs

To further accelerate this change and promote credit scoring competition, Equifax has made significant commitments:

• Reduced Pricing: Equifax will offer VantageScore® 4.0 credit scores for mortgage at an over 50% reduction from FICO score 2026 prices, or $4.50, through the end of 2027.

• Free Scores: Equifax will also provide free VantageScore® 4.0 credit scores to all Equifax mortgage, automotive, card, and consumer finance customers who purchase FICO scores from Equifax through the end of 2026.

The Future of Credit Assessment

VantageScore® 4.0 represents a significant advancement in credit scoring, offering a more comprehensive, inclusive, and accurate view of consumer creditworthiness. For lenders, this translates into:

• Expanded Market Reach: Access to millions of previously unscorable, yet creditworthy, consumers.

• Improved Risk Assessment: More precise evaluation of credit risk through trended and alternative data.

• Enhanced Competitiveness: The ability to offer more tailored products and competitive rates.

• Cost Efficiencies: Reduced pricing and free score offerings from Equifax.

As the financial industry continues to evolve, embracing innovative solutions like VantageScore® 4.0 will be crucial for sustainable growth, responsible lending, and fostering greater financial inclusion for all.

*The opinions, estimates, and forecasts presented herein are for general information use only. This material is based upon information that we consider to be reliable, but we do not represent that it is accurate or complete. No person should consider distribution of this material as making any representation or warranty with respect to such material and should not rely upon it as such. Equifax does not assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice. The opinions, estimates, forecasts, and other views published herein represent the views of the presenters as of the date indicated and do not necessarily represent the views of Equifax or its management.