Consumer data firm TransUnion said Thursday tests showed its new credit score outperformed traditional scoring approaches. In fact, one auto lender could have approved 24% more loan applications and grown the loan portfolio between 5.7% and 11.5%.
TransUnion tested the new score, CreditVision Link, with roughly 30 lenders and 35 million consumer credit reports. In the tests, lenders provided credit histories from between 12 and 24 months prior. TransUnion scored those records with the new scoring system and compared them against how the consumers performed on their loans.
TransUnion Senior Vice President Mike Mondelli explained the credit score marries traditional credit performance data with sets of additional data like property records, tax and deed records, checking and debit account records and payday lending data.
“How long you have been your current address makes a difference,” Mondelli said. “If you have bought furniture from a rent to own store, how quickly did you pay that off?”
Even how well or poorly a borrower pays for magazine subscriptions has an impact on the CreditVision Link score, he added.
Mondelli said the new approach could lift the scores of 23 million borrowers now considered subprime into a higher credit status and allow 60 million adults who currently have no credit score to obtain one. The company estimated 95% of adults in the U.S. will be covered by the new scoring system.
“Nearly six in 10 Americans are struggling financially, according to recent CFSI research,” he said. “Knowing this, it is more important than ever to deliver innovative solutions such as CreditVision Link that increase lender confidence and consumer access to quality financial services. Whether top-tier banks, community institutions, insurance carriers or specialty lenders, our customers continue to look for better ways to serve the many millions of Americans seeking a firmer financial foothold.”
Mondelli also acknowledged the new score would carry a fee, but expressed confidence that lenders will find the fee a worthwhile investment when they see how they could use it to grow their loan portfolios.
The new score complies with the Fair Credit Reporting Act and its scale runs between 350 and 850, with 850 being the best.
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