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					                                                                                                   The Score




                                                                                             February 25, 2011


Dear Friend,


This February edition of “The Score” comes during a very busy month for VantageScore as we host a live, video
webinar and sponsor several top industry conferences featuring presentations from our key executives.


The newest version of our credit scoring model, VantageScore 2.0 became available January 20, 2011 to financial
institutions from each of the three credit reporting companies (CRCs) – Equifax, Experian and TransUnion. To
help lenders learn more about credit scoring in this changing economy along with this new version of our scoring
model, we’re offering a free video Webinar Feb. 24. You can register for the webinar and read more about
VantageScore 2.0 below.


Another topic we cover in this newsletter is a new federal regulation known as the “Risk-Based Pricing Rule,”
which became effective January 1, 2011. This new rule states that, in certain instances, lenders must notify
consumers who don’t receive the best loan rates offered by that lender that the terms of their loans are less
favorable than the terms received by other consumers. But the same regulation provides lenders an option to
send free credit scores to anyone who applies for credit instead of sending the notice about loan terms to just
some of the consumers. We believe that many lenders will choose to send the free credit scores. If we’re right,
suddenly, millions of American consumers who have never received their credit score will now improve their
knowledge of credit and how their credit behavior is reflected in their score. All of which is beneficial.




Barrett Burns
President and Chief Executive Officer
VantageScore Solutions LLC
VanTageScore 2.0 now aVailable for lender USe

On January 20, 2011 the latest version of the VantageScore credit scoring model, VantageScore 2.0, became
available to financial institutions in a production environment from each of the three credit reporting companies
(CRCs) - Equifax, Experian and TransUnion.


VantageScore 2.0 launched in October 2010 and has been available for testing since that time. This new version
is now fully implemented at each CRC.


One of the driving forces behind the creation of VantageScore 2.0 was “a significant change in consumer credit
repayment behavior,” according to Sarah Davies, Senior Vice President of Product Management, Analytics and
Research. Davies encourages that all credit models be updated regularly to ensure they remain as accurate and
predictive as possible. Davies adds, “VantageScore 2.0 shows an improved performance over the original version
across the main industries where credit scores are used.”


VantageScore 2.0 was built using a development sample of 45 million credit files compiled from two performance
timeframes: 2006 – 2008 and 2007 – 2009. Each timeframe contributed 50-percent of the sample. The three-year
timeframe captures a broad range of consumer behaviors before and during the wide swings of recent economic
events, including the more recent credit conditions. Our goal was to reflect this wide range of behavior while
not being overly skewed to any single time period. Employing this development strategy extends performance
stability by reducing the model’s sensitivity to the recent highly volatile behavior had just a traditional single
timeframe been used.


The VantageScore credit risk model was first introduced in March 2006 in direct response to a demand for a credit
score model that would be more predictive, score more people and offer more consistent consumer scores across
all three credit reporting companies (CRCs) – Equifax, Experian and TransUnion.
free febrUary 24 webinar HelpS lenderS cope wiTH cHanging crediT enVironmenT
Topics include BenefiTs of updaTed scoring Model VanTagescore 2.0

With today’s dramatic shifts in the credit environment, lenders trying to make sound lending decisions need credit
scoring models that reflect these changes.


Last month, the latest version of the VantageScore credit scoring model, VantageScore 2.0, became available
to financial institutions from each of the three credit reporting companies (CRCs) – Equifax, Experian and
TransUnion. VantageScore Solutions will present a complimentary live video webinar, “Improve Risk Prediction in
a Changed Environment with VantageScore 2.0: A New Version for a New World of Risk,” on Thursday, Feb. 24 at
2 p.m. EST.


VantageScore Solutions Senior Vice President Analytics, Product Management & Research Sarah F. Davies will
cover a range of topics including:
•      Defining Algorithm Performance: Score Accuracy, Score Consistency, Score Stability
•      Use of blended, multiple timeframes from an extended window reduces algorithm sensitivity to highly
       volatile behavior in a single timeframe
•      Leveraging the robust core design of VantageScore: Advanced segmentation scheme, leveled
       characteristics and a unique performance definition
•      Performance Improvements seen in VantageScore 2.0
•      Risk alignment and score distributions


VantageScore 2.0 was created using data blended from two different timeframes, and pulled from the most
recent lending environment, 2006-2008 and 2007-2009. Using a development sample from this extended
window captures an expansive set of consumer behaviors across the full spectrum of economic events, reducing
algorithm sensitivity to highly volatile behavior that can be found in a single timeframe, extending performance
stability.


“VantageScore 2.0 leverages the core VantageScore platform to deliver improved predictive performance, so that
lenders can look beyond the economic volatility of recent years and reenter the market with confidence,” said
VantageScore Solution President/CEO Barrett Burns.


To register for this free Webinar, go to:
http://register.sourcemediaconferences.com/webevent/ab_vs1.cfm?sourcecode=abp1
did yoU Know? crediT ScoreS SHoUld noT be Sole deTerminanT of crediTworTHineSS

Recent data from Experian shows the average U.S. VantageScore credit score in August was 748, an eight-point
decline since 2007. According to Experian’s findings, the average VantageScore credit score was 755 in August
2008 and 750 in 2009.


Despite the minor decrease since 2007, the research further shows that many consumers are reducing their debt
to lighten their monthly debt burden, resulting in an improvement to their credit scores. It’s never a bad strategy to
pay down excessive debt, but consumers should be aware that lenders use many factors when considering a loan
application - a credit score is just one of those many factors.


Simply, a credit score rank orders consumers according to the likelihood that they will become 90 days or more
past due on an account within two years. Credit scores are derived from complex mathematical formulas that
use the consumer payment behavior data contained in credit files present at the three national credit reporting
companies, Equifax, Experian and TransUnion, to generate the score.


However, a credit score does not predict risk or credit losses. This is attributable to a variety of reasons, including
that many lenders’ target markets are different and each lender’s credit criteria and risk tolerance varies.


Credit scores contribute to, but are not a substitute for, sound underwriting practices. It is important that credit
scores be a part of any decision process for credit approval but not the sole criterion. Credit scores provide
lenders with consumers’ likelihood to pay based on previous behavior, but do not provide lenders with an
indication of consumers’ ability to pay.


Approving large loans without also verifying other critical information needed to assess a consumer’s ability to
repay the loan, such as employment, income level or assets, is simply not prudent. While maintaining a good
credit score certainly helps consumers obtain become eligible for credit at lower interest rates and better terms
and conditions, applicants should understand that depending on the nature of the credit being requested, income,
job history, assets and other criteria could be equally important considerations as lenders review loan applications.
VanTageScore SolUTionS preSidenT/ ceo named To federal reSerVe board conSUmer
adViSory coUncil

Last month, the Federal Reserve Board named VantageScore Solutions President and Chief Executive Officer
Barrett Burns to its Consumer Advisory Council.


The Consumer Advisory Council was established in 1976 to represent interests of consumers, communities and
the finance services industry. Council members are appointed by the Federal Reserve Board of Governors and
meet three times a year in Washington, D.C. The meetings are open to the public.


The council’s role is to advise the Federal Reserve Board on the exercise of its responsibilities under the
Consumer Credit Protection Act and on other matters in the area of consumer financial services.


“I am honored to serve on the Consumer Advisory Council,” said Burns. “The council plays an important role in
providing guidance to the Federal Reserve on a variety of financial issues and there is a lot of work to do in the
months ahead as we tackle the unprecedented economic challenges of our time.”


According to the Federal Reserve Board, the Council will hold its regular meetings in Washington, D.C., until a
designated transfer date upon which certain consumer protection functions will be transferred from the Board to
the new Bureau of Consumer Financial Protection, pursuant to the Dodd-Frank Act.


The Federal Reserve Board news release on Burns’ appointment can be seen here:
http://www.federalreserve.gov/newsevents/press/other/20110110b.htm
riSK-baSed pricing informaTion now aVailable To conSUmerS on VanTageScore web SiTe

As of January 1, 2011, as part of the “Fair and Accurate Credit Transactions Act,” creditors are now required to
provide a “risk-based pricing notice” to prospective borrowers who are granted credit on less favorable terms than
other consumers.


Another option under the new regulation allows lenders to give consumers a free copy of the credit score used to
set the interest rates and terms.


To help consumers understand credit reports and credit scores, VantageScore Solutions has added a new section
to its Web site discussing topics related to the “Risk-based Pricing Regulation,” including “multiple-tiered pricing
notices” and the free credit score option.


“We created the new section on risk-based pricing because consumers need and will benefit from resources like
this,” said VantageScore Solutions President/CEO Barrett Burns. “Despite changing consumer payment behavior,
surveys show knowledge of credit-related issues is still lacking.”


Burns cited the 2010 Consumer Financial Literacy Survey Final Report conducted on behalf of The National
Foundation for Credit Counseling, which shows that 65 percent of adults (approximately 148 million), have not
ordered a copy of their credit report within the past 12 months and 31 percent (about 70.5 million) do not know their
credit score.


Consumers seeking information on risk-based pricing can log on to:
http://www.vantagescore.com/riskbasedpricing/
VanTageScore SolUTionS 2011 conference and eVenT ScHedUle

Mortgage Bankers Association
National Mortgage Servicing Conference & Expo

Feb. 22-25
Gaylord Texan Hotel & Conference Center
Grapevine, Texas
http://events.mortgagebankers.org/servicing2011/register

Royal Media Group
Auto Risk Finance Summit

March 21-22
The Adolphus Hotel
Dallas, Texas
http://royalmedia.com/events/Auto-Finance-Risk-Summit-2011

American Bankers Association
Risk Management Forum

April 13-15
Hyatt Regency
Denver, Colo.
http://www.aba.com/Events/riskmanagement.htm




About VantageScore
VantageScore is the generic credit scoring created by America’s three major credit reporting companies. Our
highly predictive model uses an innovative, patent-pending scoring methodology to provide lenders with a
consistent interpretation of consumer credit files. This means lenders can help more creditworthy borrowers,
and millions of Americans who use credit infrequently can be accurately scored.



VantageScore.com

				
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