Expansion of VantageScore's Open Banking credit score trial program announced
VantageScore 4Plus: Revolutionising Credit Scoring with Open Banking and Alternative Data
VantageScore, a US-based credit scoring company, has expanded its VantageScore 4Plus pilot program for lenders, marking a significant step forward in the credit industry. The program, launched in partnership with the national non-profit network Credit Builders Alliance, aims to provide underserved borrowers with increased access to credit.
Dara Duguay, the CEO of Credit Builders Alliance, stated that the collaboration gives non-profit lenders access to modern, high-quality credit scores, enabling them to better serve their communities while maintaining sound lending practices.
The main developments and benefits of VantageScore 4Plus include the use of alternative and Open Banking data, increased predictive accuracy, expanding access for underserved borrowers, support for non-profit and inclusive lending, dynamic and transparent credit behavior insights, and response to industry and regulatory needs.
By incorporating alternative credit data such as rent, utility, and cellphone payments, as well as consumer-permissioned bank account data (Open Banking), VantageScore 4Plus broadens the credit profile of borrowers who traditionally lack sufficient credit history. This inclusion has been particularly beneficial for applicants with new-to-credit, thin, or inactive credit files, who comprised 15% of the participants in the pilot program and were found to have benefited "significantly" from the addition of Open Banking data.
VantageScore 4Plus is shown to be 11-15% more predictive over time than legacy credit scores, reducing risk for lenders and making credit decisions more accurate. By scoring approximately 33 million consumers who were previously unscored by traditional models, and estimating 2.7 million additional mortgage opportunities (up to $1 trillion in loans), the model enables more people—including veterans, farmers, and first-time homebuyers—to access credit and mortgages.
The model’s leveraging of cash flow and alternative data helps non-profit lenders better underwrite loans with lower risk, expands their addressable markets, and promotes financial inclusion by validating creditworthiness in underbanked populations. The use of Open Banking data provided clearer risk segmentation, with nearly equal numbers of consumers seeing increases and decreases in their credit score during the pilot.
The Federal Housing Finance Agency (FHFA) has mandated VantageScore 4.0 for Fannie Mae and Freddie Mac loans, signaling trust in the model for mortgage credit decisions and encouraging a competitive, data-rich credit environment that benefits consumers.
More than 3,400 US institutions, including eight of the top 10 banks, use VantageScore credit scores to provide consumer credit products. Using VantageScore 4Plus, 44% of previously declined applicants could be "reconsidered" under what VantageScore called a "second look" strategy.
In conclusion, VantageScore 4Plus offers improved predictiveness, broader data usage via Open Banking and alternative data, and greater inclusivity, which helps underserved borrowers gain mortgage and credit access while enabling non-profit lenders to manage risk more effectively.
For further reading, you can explore "VantageScore CEO hails 'new era' of credit scoring with Open Banking data".
[1] Open Banking and Alternative Data: A New Era for Credit Scoring - VantageScore Solutions [2] VantageScore 4.0: A New Standard for Credit Scoring - VantageScore Solutions [3] VantageScore 4Plus: Expanding Access to Credit for Underserved Borrowers - Credit Builders Alliance [4] FHFA Mandates Use of VantageScore 4.0 for Fannie Mae and Freddie Mac Loans - HousingWire
- The VantageScore 4Plus program, in collaboration with Credit Builders Alliance, incorporates Open Banking data and alternative data to revolutionize credit scoring, providing increased access to credit for underserved borrowers.
- By using Open Banking data and alternative credit data such as rent, utility, and cellphone payments, VantageScore 4Plus offers a more comprehensive credit profile for borrowers with limited or no credit history.
- As a result of using VantageScore 4Plus, lenders can make more accurate credit decisions, while non-profit lenders can manage risk more effectively and serve their communities better.
- The Federal Housing Finance Agency (FHFA) has mandated the use of VantageScore 4.0 for Fannie Mae and Freddie Mac loans, indicating trust in the model for mortgage credit decisions and fostering a competitive, data-rich credit environment.
