VantageScore broadens its Open Banking credit score trial program

VantageScore broadens its Open Banking credit score trial program

In a groundbreaking move, US-based credit scoring company VantageScore has expanded its VantageScore 4Plus pilot program for lenders. The initiative, launched in partnership with national non-profit network Credit Builders Alliance last year, aims to create a more inclusive mortgage market by incorporating alternative financial data to better evaluate creditworthiness beyond traditional credit reports.

The VantageScore 4Plus model, which enables access to Open Banking data, has shown promising results. Initial data from the pilot, which ran from September last year, has shown improvements in the ways non-profit lenders can assess and serve potential borrowers. More than 3,400 US institutions, including eight of the top 10 banks, use VantageScore credit scores to provide consumer credit products.

One of the key benefits of the VantageScore 4Plus model is its ability to reconsider previously declined applicants. Using this model, 44% of previously declined applicants could be "reconsidered" under what VantageScore called a "second look" strategy. This strategy is particularly beneficial for underserved borrowers who may have limited credit history. Applicants with new-to-credit, thin or inactive credit files comprised 15% of the participants in the pilot program and were found to have benefited "significantly" from the addition of Open Banking data.

The use of Open Banking data provides clearer risk segmentation, with nearly equal numbers of consumers seeing increases and decreases in their credit score during the pilot. VantageScore's executive vice president and chief data scientist, Andrada Pacheco, stated that adding real-time, permissioned data to the credit decisioning process improves predictive performance and creates more opportunities for expanding responsible access to credit.

Pacheco also emphasized that non-profit lenders need tools that are both inclusive and predictive. She supports the program’s use of Open Banking data, noting it provides timely data insights and helps lenders better identify credit risk among underserved populations.

Dara Duguay, chief executive officer of Credit Builders Alliance, shares a similar view. She stated that the collaboration gives non-profit lenders access to modern, high-quality credit scores, equipping them to better serve their communities, while maintaining sound lending practices. Duguay highlights that the initiative can create a more expansive, inclusive marketplace for mortgage finance by providing deeper insight into consumers’ financial behavior beyond traditional credit files.

The FHFA's recent mandate requires mortgage lenders selling loans to Fannie Mae or Freddie Mac to use VantageScore 4.0, which has been shown to be more predictive and inclusive, especially at lower score ranges where most defaults occur. This adoption is expected to open the door to millions more qualified applicants without increasing credit risk, thus supporting underserved borrowers in gaining access to homeownership.

In summary, the VantageScore 4Plus pilot program leveraging Open Banking data is actively advancing financial inclusion for underserved borrowers. Experts Dara Duguay and Andrada Pacheco endorse the thoughtful integration of this data, seeing it as a key step toward broader credit access and improved risk assessment in mortgage lending.

1. The VantageScore 4Plus model, which utilizes Open Banking data, has shown significant improvements in assessing and serving potential borrowers, particularly those with limited credit history.
2. Using Open Banking data in the credit decisioning process, according to VantageScore's executive vice president, improves predictive performance and creates more opportunities for expanding responsible access to credit.
3. The collaboration between VantageScore and Credit Builders Alliance on the VantageScore 4Plus pilot program equips non-profit lenders with modern, high-quality credit scores, enabling them to better serve their communities while maintaining sound lending practices.

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