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Lending

FICO’s latest update draws VantageScore ire

New product is a "competitive response"

magnifying glass

FICO introduced its new FICO Score 9 as a way to assess consumer collection information, bypassing paid collection agency accounts and differentiating between medical and non-medical collection agency accounts.

The latest product ensures that medical collections have a lower impact on the score, commensurate with the credit risk they represent.

As a result, median FICO scores for consumers whose only major black marks are unpaid medical debts are expected to increase by 25 points.

In addition, FICO says the update is more predictive of a consumer's likelihood to repay a debt than previous versions, capturing recent consumer behavior to give lenders better risk assessments across the credit lifecycle and all credit products.

But the new technology doesn’t come without scrutiny from its competitor VantageScore.

“FICO’s announcement appears to be a competitive response to the traction that VantageScore 3.0 has garnered amongst the largest lenders in the country, and changes to the new FICO model apparently try to remedy many lender and consumer challenges already addressed by VantageScore,” Barrett Burns, president and CEO of VantageScore Solutions. 

“The real test of a model’s capability is how it performs on each lender’s unique portfolio, and we challenge every lender to test any model they are using, and any other models available to them, against VantageScore 3.0 to be sure they are employing the best model for their business strategy,” Burns added.

VantageScore came into fruition by the three national bureaus Experian, TransUnion and Equifax, in rebuttal to FICO. And the two have been in conflict since.  

Back in March, VantageScore released VantageScore 3.0, which wields similar characteristics to FICO Score 9.      

“The VantageScore 3.0 model provides risk managers a level of predictiveness that will allow them to confidently extend credit to tens of millions of consumers that were previously invisible to them so that those consumers have a greater chance to access mainstream credit, which is one of our principle goals,” Burns said.

In response, Anthony Sprauve, senior consumer credit specialist with FICO, said, "Vantage Score 3.0 only addresses paid collections, which only account for 10% of collections reported to the three national credit bureaus.  What FICO announced today is a  new refined treatment of unpaid collections – medical and non-medical – that differentiates unpaid medical from unpaid non-medical collection agency accounts."

"This ensures that unpaid medical collections have a lower impact on the FICO Score, commensurate with the credit risk they represent. These enhancements result in greater precision," he continued. 

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