Will people use vantage 4.0?

[Subexistence]

I don't understand the hype behind vantage 4.0 because no one seems to use vantage whatsoever. Also no one here knows any vantage specific optimizing strategies analogous to AZEO. I heard that trended data is too cumbersome for lenders to report.

[Anonymous]

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@Subexistence wrote:

I don't understand the hype behind vantage 4.0 because no one seems to use vantage whatsoever. Also no one here knows any vantage specific optimizing strategies analogous to AZEO. I heard that trended data is too cumbersome for lenders to report.

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Based on thier site people use it :

https://www.vantagescore.com/who-uses-our-model

[Thomas_Thumb]

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@Subexistence wrote:

I don't understand the hype behind vantage 4.0 because no one seems to use vantage whatsoever. Also no one here knows any vantage specific optimizing strategies analogous to AZEO. I heard that trended data is too cumbersome for lenders to report.

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I'm quite interested in seeing some VS4 scores.

Looking forward to the day when transactor behavior is recognized and allowing balances to report naturally on a majority of cards is a non event. Competition fuels useful innovation and credit scoring models are no exception. No doubt recent Fico models (Fico 8, Fico 9 and Fico XD) have been influenced by alternate models.

The fields needed for transactor/revolver analysis and targeted trend analysis exist on CRA reports. Those tools offer the potential to improve risk analysis accuracy and more effectively detect changes in behavior having a high correlation to increased risk.

[Subexistence]

TT, would such a move cause more people to become transactors and less profit for banks as a result? Do you think it will affect credit card rewards?

[Thomas_Thumb]

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@Subexistence wrote:
TT, would such a move cause more people to become transactors and less profit for banks as a result? Do you think it will affect credit card rewards?

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I would anticipate no change in profitability associated with changes in scoring models. It is highly unlikely the transactor/revolver designation would alter the typical consumers spending behavior. Less than 0.1% of consumers know the finer points of Fico scoring factors to begin with. With current and older Fico models those that PIF before statements cut and those that PIF after statement cuts avoid interest payments. However, those that PIF after are often penalized in Fico scoring even though true risk should be the same in both cases. Categorizing transactor behavior can correct this injustice.

Credit card rewards are driven by competition among card issuers in the marketplace. I don't think Fico scoring model attributes pay a role in rewards programs - other than CC issuers providing free access to score as a selling point.

[Anonymous]

Hi SubEX.  Remember two things as well:

(1) The issue is not simply the T-R distinction, with a simplistic T is good and R is bad.  The latter is pretty accurate when it comes to a lender who is trying to sell you a loan.  For them T's have a big unqualified advantage over R's (due to their statistically greater chance of delinquency). 

For credit card issuers, however,  the issue is much more complex.  Their perfect customer is either someone who is spending a huge amount each month (thus generating a lot in swipe fees) or a person who is an R but appears to be relatively safe (thus generating a lot in interest).  The CCCs will want to use trended data (assuming a reliable amount becomes available at the CRAs) is a richer and more sophisticated way to target these kinds of profitable customers.  Low spending Transactors or unreliable R's may be targeted as unwanted customers.  And thus for a CCC it won't be nearly as simple as Is he a T or an R?

(2)  The issue is not simple as "when will the big models use trended data?" (e.g. FICO 10 or Vantage 4).  Specialized products are likely already being developed for certain industries to use trended data -- products that can be used in addition to the "main" score.  Fannie Mae added a trended data module to its Desktop Underwriter tool about a year ago, for example. 

Because of both of these ideas (taken together) I wouldn't be surprised if trended data are eventually used to identify (to a prospective CC issuer) people who open cards purely to chase bonuses.  I,e. someone who opens a card, spends a lot in the first 90 days, and then either closes it within the first year or the spending drops to a tiny amount after Day 90.  Such a customer is a bad investment for the company and TD may be a tool to avoid getting them in the first place.

We may look back and see the first two decades of this century as the Golden Age of bonus chasing, a fascinating and colorful blip in history, like the flappers of the 1920s.

[Subexistence]

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@Anonymous wrote:

Hi SubEX.  Remember two things as well:

(1) The issue is not simply the T-R distinction, with a simplistic T is good and R is bad.  The latter is pretty accurate when it comes to a lender who is trying to sell you a loan.  For them T's have a big unqualified advantage over R's (due to their statistically greater chance of delinquency). 

For credit card issuers, however,  the issue is much more complex.  Their perfect customer is either someone who is spending a huge amount each month (thus generating a lot in swipe fees) or a person who is an R but appears to be relatively safe (thus generating a lot in interest).  The CCCs will want to use trended data (assuming a reliable amount becomes available at the CRAs) is a richer and more sophisticated way to target these kinds of profitable customers.  Low spending Transactors or unreliable R's may be targeted as unwanted customers.  And thus for a CCC it won't be nearly as simple as Is he a T or an R?

(2)  The issue is not simple as "when will the big models use trended data?" (e.g. FICO 10 or Vantage 4).  Specialized products are likely already being developed for certain industries to use trended data -- products that can be used in addition to the "main" score.  Fannie Mae added a trended data module to its Desktop Underwriter tool about a year ago, for example. 

Because of both of these ideas (taken together) I wouldn't be surprised if trended data are eventually used to identify (to a prospective CC issuer) people who open cards purely to chase bonuses.  I,e. someone who opens a card, spends a lot in the first 90 days, and then either closes it within the first year or the spending drops to a tiny amount after Day 90.  Such a customer is a bad investment for the company and TD may be a tool to avoid getting them in the first place.

We may look back and see the first two decades of this century as the Golden Age of bonus chasing, a fascinating and colorful blip in history, like the flappers of the 1920s.

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If churners are discriminated based on trended date, what is the chance that I'm digging myself into a big trap? What is the chance that I churn today then a year from now, trended data is used by lenders and then no one will extend a credit card to me?

[Anonymous]

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@Subexistence wrote:

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@Anonymous wrote:

Hi SubEX.  Remember two things as well:

(1) The issue is not simply the T-R distinction, with a simplistic T is good and R is bad.  The latter is pretty accurate when it comes to a lender who is trying to sell you a loan.  For them T's have a big unqualified advantage over R's (due to their statistically greater chance of delinquency). 

For credit card issuers, however,  the issue is much more complex.  Their perfect customer is either someone who is spending a huge amount each month (thus generating a lot in swipe fees) or a person who is an R but appears to be relatively safe (thus generating a lot in interest).  The CCCs will want to use trended data (assuming a reliable amount becomes available at the CRAs) is a richer and more sophisticated way to target these kinds of profitable customers.  Low spending Transactors or unreliable R's may be targeted as unwanted customers.  And thus for a CCC it won't be nearly as simple as Is he a T or an R?

(2)  The issue is not simple as "when will the big models use trended data?" (e.g. FICO 10 or Vantage 4).  Specialized products are likely already being developed for certain industries to use trended data -- products that can be used in addition to the "main" score.  Fannie Mae added a trended data module to its Desktop Underwriter tool about a year ago, for example. 

Because of both of these ideas (taken together) I wouldn't be surprised if trended data are eventually used to identify (to a prospective CC issuer) people who open cards purely to chase bonuses.  I,e. someone who opens a card, spends a lot in the first 90 days, and then either closes it within the first year or the spending drops to a tiny amount after Day 90.  Such a customer is a bad investment for the company and TD may be a tool to avoid getting them in the first place.

We may look back and see the first two decades of this century as the Golden Age of bonus chasing, a fascinating and colorful blip in history, like the flappers of the 1920s.

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If churners are discriminated based on trended date, what is the chance that I'm digging myself into a big trap? What is the chance that I churn today then a year from now, trended data is used by lenders and then no one will extend a credit card to me?

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Very low.  I'd say the opposite conclusion is the more reasonable one: that if you want to churn, now is the time to do it. 

The idea that robust TD-based antii-churning technology will be in place in a year is a wildly aggressive timeline, for one thing.  For another, if you are opening several cards a year for the next few years, then you'll have many cards in a few years.  (You should attempt to downgrade them to no-annual fee version rather than close them.)  So you'll already have plenty of cards.  For yet another thing, it's possible to avoid some of the more visible "I am a churner" TD behavior; you can keep cards open, don't completely stop your spending on them after Day 100, etc.  Yet another, even assuming that strong TD based products for CC issuers exist in five years (a huge IF) that just means a CCC may be reluctant to issue you cards with huge bousues, not that they will be unwilling to issue you any cards at all.  (Though as I say you'll already have plenty of cards.) 

[HeavenOhio]

If credit card companies really want to use trended data, they're going to have to start reporting it. Right now, Barclays and Synchrony are, for instance. But Capital One and Chase aren't. If the numbers are on credit reports, banks will be able to consider them whether the scoring models acknowledge them or not.

[Anonymous]

What type of TD is being reported?  I've looked at my credit report recently and haven't seen anything different with my Synchrony accounts reported verses my others.