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VantageScore Solutions Granted Patent For Its Characteristic Leveling Method and System
Wednesday, February 02, 2011
Stamford, CT -- The U.S. Patent and Trademark Office recently granted VantageScore Solutions U.S. Patent No. 7,801,812, providing intellectual property protection for the firm’s methods and systems of characteristic leveling.
“Leveled credit characteristics are the foundation of consistent consumer credit risk evaluation,” explained VantageScore Solutions’ Senior Vice President, Product Management, Analytics and Research Sarah Davies.
Characteristic leveling is a process that yields consistent and equitable characteristic definitions across multiple sources of credit data. This process ensures that when the same data is present from multiple credit sources, for example two or more credit reporting companies (CRCs), it is interpreted in the same manner.
Simply put, characteristic leveling vastly reduces the variance in definitions of the data across the three CRCs used in the calculation of a VantageScore credit score, substantially increasing the likelihood that this consumer behavior data will be interpreted in the same manner, generating more consistent VantageScore credit scores across the CRCs. The technology behind this approach was innovative and resulted in the patent.
Differences in credit scores are often seen when the scores are obtained simultaneously from more than one of the CRCs credit data files: Equifax, Experian or TransUnion. Davies said one reason for this difference in scores is due to how the CRCs handle “definitions” of the consumer behavior characteristics housed within their databases. For example, one CRC may define a bank card as a revolving card while another CRC may include both revolving cards and secured cards in their definition.
These differences in definitions of consumer behavior characteristics can result in the data being processed differently by any given credit score model. In order to minimize this effect, the VantageScore development team worked to align the definitions across the three CRCs for the data that the VantageScore model uses when calculating a consumer score.
The characteristic leveling process provides lenders with increased confidence of consistent credit decisions, regardless of the data source, and gives consumers comparable risk assessment regardless of which CRC their financial institution chooses.
With the same model in place at each CRC and the implementation of characteristic leveling, any score differences for the same consumer can now be attributable to other reasons, including differences in the data contained in the consumer’s files, not the scoring algorithm. The content differences are due to, among others factors, the timing of the receipt of data from lenders, whether all lenders report consumer payment information and, if so, to which of the CRCs it is reported.
“This is the first time this innovation has been achieved, making it a breakthrough in credit scoring,” added VantageScore Solutions President and Chief Executive Officer Barrett Burns. “The ability to use a common score across the three CRCs minimizes consumer and lender confusion. Because of VantageScore’s consistency across all three CRCs, lenders who use it will be better able to delineate risk in a predictive manner.”
The VantageScore credit score is used by numerous lenders making billions of decisions annually, including all of the top five credit card issuers, four of the top five financial institutions and two of the top five auto lenders.
Stamford, Conn. based VantageScore Solutions, LLC (www.vantagescore.com) is an independently managed company that holds the intellectual property rights to VantageScore. Created by America’s three major credit reporting companies (CRCs) — Equifax, Experian and TransUnion — VantageScore’s highly predictive model uses an innovative and patented scoring methodology to provide lenders with a more consistent interpretation of consumer credit files across all three major credit reporting companies and the ability to score more people.
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