A new study from TransUnion said the consumer data firm's new CreditVision credit score will create credit scores for 26.5 million more American. The product will also increase A paper borrowers.
"The majority of lenders rely heavily on credit risk scoring to determine the best products and pricing for applicants, and TransUnion is leading the charge in making sure consumers get the credit they earned," Charlie Wise, vice president in TransUnion's Innovative Solutions Group, said.
"CreditVision scoring means millions of previously unscored consumers, who typically have difficulty accessing credit, may now have significantly expanded borrowing opportunities," he added. "It also means that millions more consumers may be offered lower interest rates resulting in reduced payments on credit cards, mortgages, insurance policies and auto loans."
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The firm studied a sample of 10 million credit records from its broad pool at and compared how the traditional scoring system against the CreditVision system.
In particular, the study sought to determine whether using the CreditVision score would result in consumers moving to a different risk tier.
The risk tiers used the study were taken from traditional credit scoring systems and included subprime (501-540), near prime (641-699), prime (700-899) and super prime (900-990).
TransUnion found that while the traditional scoring system scored 52.2% of the 10 million records as prime or super prime, the CreditVision system scored 53.4% of them as such.
The study also found that the traditional scoring system left 17.6% of the records unscored while the CreditVision system left only 7.5% unscored.
"Time-series data is the key element that allows TransUnion to score consumers who were previously unscoreable. TransUnion's CreditVision scores enhance lending decisions by leveraging an expanded view of credit data on each consumer that includes up to 30 months of historical information on each loan account," the study read.
TransUnion contended that CreditVision scores enhanced lending decisions by leveraging an expanded view of credit data on each consumer, including up to 30 months of historical information on each loan account. CreditVision scores also included the addition of actual payment amounts, a field that is new to the credit report and not included in any other traditional risk scores today.
This expanded view of data can revealed trends and behaviors, such as consumers making on-time payments, paying more than the minimum amount due, reducing total amounts borrowed or decreasing utilization over time, TransUnion said. For the first time, many consumers will benefit from insights into payment behaviors like whether consumers are paying card balances in full compared to making minimum payments, the firm said.
"CreditVision's inclusion of both current and historical payment information allows lenders to identify specific credit trends and payment behaviors that allow them to make more precise lending decisions," Tony Terrazas, senior vice president in TransUnion's Innovative Solutions Group, said. "These added insights will help our clients confidently engage new credit-worthy and credit-seeking populations. The result: More consumers will gain access to credit."
The study also looked at how 826,000 new loans taken out in January and February of 2014 performed over 24 months. It found they had performed as the CreditVision score predicted.
Michael Croal, Senior Director with the Scottsdale, Arizona based Cornerstone Advisors generally approved of the CreditVision score as well as refinements from other consumer data firms to their scores, but he also pointed out that the changes needed to season and stand the test of time to be accepted.
'Everything depends upon the validation," he said, after noting that the addition of the payment data to how TransUnion calculates the CreditVision score is likely to be particularly helpful to mortgage lenders who seeking more data to evaluate risk.
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