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How Credit Score Competition Is Reshaping the Mortgage Market · Market Pulse

• 0:02
  Welcome to a special edition of Market Pulse from Equifax,
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  where we break down what's shaping the mortgage industry today and what happens
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  next.
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  Hi, I am Clayton Collins, CEO of HousingWire,
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  and we're here at MBA annual 2025 in Las Vegas,
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  Nevada at the Equifax Podcast booth here in the Expo hall.
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  And I'm joined by Rikard Bandebo, the Chief Strategy Officer,
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  and Chief Economist at VantageScore. Rikard, thanks for joining me.
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  I'm delighted to be here, Clayton. Alright, credit scoring.
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  Credit reporting incredibly active and important topics in 2025
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  in July of this year,
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  FHFA director Bill Pulte made an announcement that Fannie Mae and Freddie Mac
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  will begin accepting Vantage score.
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  Tell us about what the last several months have meant for you since that
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  announcement. I mean, it's been very, very positive for us. You know,
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  we are big fans of competition and innovation in the, in the mortgage space.
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  We think it's going to be really,
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  really good for the industry and for consumers. And it's good, I think,
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  to see you know,
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  the 2018 credit Reporting Act being put in place.
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  So, no, very positive. All right. Let's go deeper on the,
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  on the topic of competition. So what does competition look like in the past?
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  What do you think it's going to look like in the future? Let's go,
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  go deeper on that topic. Well, I mean, the past, there hasn't been competition,
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  right? Through sort of happenstance of fate,
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  there's been only one score that's been allowed to be used for mortgages,
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  and that score has been there since even before the last recession. Now,
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  some of these scores go back to the nineties.
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  So it's a system that has been around a very long time.
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  It's a system that the Federal Reserve found failed in 2008.
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  They found that actually the score was a big issue at that time,
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  but hasn't yet been changed. So for the integrity of the system,
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  and also just to enable the millions of consumers that have been left behind by
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  the current scoring system who actually are credit worthy and should be able to
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  have a house, we think this is really positive,
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  is the millions of consumers that have been left behind a,
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  a conversation that you have with, with lenders and other stakeholders in the,
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  in the housing market every day. I think this is what excites them the most,
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  right. Because this is, you know,
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  a house is one of the most important things that people buy in their lives.
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  Yeah.
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  It's also the biggest ability that people have to create generational wealth.
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  So from a consumer perspective and from an organizational perspective,
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  it's a really big deal. And when lenders see an opportunity,
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  particularly when the housing market's pretty tough to be able to lend to more
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  people without increasing risk that excites them. So from your point of view,
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  what are the,
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  the characteristics or strategic elements of Vantage score that help open that
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  credit box and make houses and, and housing more accessible?
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  So there are a few things. The legacy score has some restrictions on it. Okay.
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  Which exclude tens of millions of US consumers, right?
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  Because Vonner score four uses up to 24 months of history
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  is able to then actually build a much more accurate profile and score people
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  that would otherwise not have been scored. Also, it uses rental data,
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  utilities data,
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  and other data that can give really good insights into how a person will perform
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  on a mortgage. I mean, at the end of the day, think about it, right?
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  The rent check is probably the biggest outlay people have Yeah. On their,
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  on an ongoing boat basis, right?
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  So if you're trying to understand how they'll perform on a mortgage,
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  seeing how they did on rent is an absolute winner. I mean,
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  so rent is probably the most important element for first time home ownership.
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  Do you believe an ecosystem where, where rent or and Vantage score is used for,
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  for mortgage underwriting that like first time homeowners have a,
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  a new advantage or or we open the,
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  the box for first time ownership to home ownership to expand faster with Vonage
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  score,
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  about 5 million more households should just be eligible to get a mortgage and
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  then new system. Okay. That,
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  and that's before you add rental data with rental data, there should be many,
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  many more consumers who should be able to be either eligible for a conforming
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  mortgage or be eligible for better pricing.
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  What does a housing market look like when 5,000 like new borrowers are eligible?
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  We, we've talked for, for years about constrained supply,
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  and I know there's different you're a chief economist as well,
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  so you may have a theory on where we are in the supply supply demand,
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  equilibrium, equilibrium, but with 5 million more eligible borrowers,
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  does that create a more competitive housing market where home prices get driven
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  up? Or is there a, a different you know, a different element that happens there?
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  It's a great question. The reality is,
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  is where we see most of these people that have been left behind by the current
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  system,
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  they tend to be actually in rural areas or in areas that have traditionally been
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  high rental areas where there hasn't been much demand for buying housing.
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  Right. And so that could actually be very,
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  very beneficial for those communities.
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  It can help drive the economy in those communities and create a better wealth
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  system in those communities. Yeah,
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  we always talk about a national housing market, but we know it's a, you know,
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  collection of hundreds or thousands of, of local markets,
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  which all have different dynamics.
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  I've seen a lot of supply and demand analysis by market in the US and
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  markets like Austin are performing very different from a markets in
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  the, in the Midwest where supply has actually been a little bit tighter. Yeah.
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  Or for instance, you know,
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  when we look at Vanish score and some of the states where there's the biggest
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  ability to score more people,
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  West Virginia tops that state with over 20% of pop the population of West
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  Virginia not scored under the current model that would be scored under VAGE
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  score four. Okay.
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  So since Director polt came out with the announcement that Fannie and Freddie
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  would start accepting Vantage score, there's been debate,
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  there's been different viewpoints and there's been misunderstanding.
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  What do you think the,
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  the mortgage market has misunderstood about Vantage score and what
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  Fannie and Freddie accepting VantageScore might mean for,
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  for them it's a change in a system that hasn't changed for over 30 years. Yeah.
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  So it's always going to be quite hard for people to understand exactly how
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  that's going to happen,
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  but the good thing is like we're seeing such appetite from the large mortgage
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  originators, from the CRAs and resellers from the insurance companies.
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  So there's a huge appetite to get this going. Everybody believes in,
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  in this competition, and everybody believes to be able to score more people.
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  I think where some of the confusion all lies is unfortunately,
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  like in many things these days, there's a lot of misinformation out there.
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  And so we do our best to try to correct that. But I think what, you know,
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  what people should do is to look at the independent sources, right?
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  Look at whether it's the investment banks that have done analysis on the
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  different scores and written reports on it,
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  or like people like JP Morgan Chase or Bank of America or Bloomberg,
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  like go to those sources, right? You, you know, that they,
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  they're relatively independent when it comes to great sources,
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  but not the sources that loan originators or consumers are going to be visiting.
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  I mean, I get all the equity analyst reports,
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  but they're not widely distributed. No, that's true. But I,
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  I think for a consumer, I mean most consumers,
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  when they look at their own credit score,
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  VantageScore is the score that they most likely to see. Okay. Right.
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  So we've we were a pioneer in consumer display and for the past
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  15 years or so, where we've seen that whole consumer display market increase,
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  we've been by far the most used score in that area.
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  So it's not an alien concept to them, whether they go to Credit Karma,
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  whether they go to Chase or wherever to look at their credit score.
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  It's a score that they see on a regular basis. Okay. So I definitely see the,
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  the potential for, for consumer impact in industry impact.
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  You talked about the CRAs and resellers.
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  How does this how does adoption of Vantage score impact them?
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  Is there opportunity? Is there threat? Like give us a, a view there? Well,
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  they've already put the pipes in. Okay.
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  So we're delighted that the industry is so ready and they've already,
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  they're already passing VantageScore four through to their originators. And,
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  and they're working with us.
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  We're also partnering really closely to ensure that there's a simulator,
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  a really good simulator that can be put in place to,
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  so that consumers can be helped to figure out what steps they need to take and
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  what will have the biggest impact so that they can get ready for that mortgage.
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  Okay. So if the pipes are in place with the CRAs and resellers,
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  what about with the originators themselves? Is there work to be done? You know,
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  within their own four walls of the,
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  the large originators to prepare their operations for VantageScore? I mean, the,
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  the large ones have gone back. They've done their homework. They've, you know,
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  they've back tested and looked at all their historic data to understand how
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  Vanish score four will look like on their own portfolios.
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  So the big one's already there. Okay. and,
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  and what I would say is that for those that are kind of the next step down,
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  haven't quite done this yet,
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  we definitely recommend that you do this because at the end of the day,
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  if you don't, your competitor is,
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  and they're going to be able to get more customers than you.
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  So I think that's a, a pretty big deal. All right.
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  So the big ones have done the work and have the, you know, have tested and,
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  and analyzed back data. What about the smaller lenders?
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  Is that a dynamic that they've been prepared for?
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  We're seeing a mixed bag there. We see several that see who,
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  particularly those that are more mission focused, who see, you know,
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  being able to open up home ownership to more communities as part of how they
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  work. They're really getting behind this,
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  but then there are others who are waiting to see what the,
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  what the big guys are going to do.
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  And then they'll probably follow suit once they've seen the successful
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  implementation at some of the bigger agencies. So when I talk to originators,
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  they, they all want to serve more consumers and do more loads,
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  but they're also price sensitive at a, at a report level.
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  And so what does VantageScore mean for originators who are concerned about like,
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  the price they pay for, for credit data? Over this past week,
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  we've seen all the three national credit reporting agencies come out and
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  publish what their planned pricing is for VantageScore.
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  And they've also put out several deals or,
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  and to provide a lot more easy access to those that are using the Legacy score.
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  So we think that is great.
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  We think that they have heard what Pulte is looking for and they've
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  responded in kind.
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  And now we're actually seeing real competition because remember,
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  up to this point,
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  we've seen the price of these scores go from what near 30 cents to now
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  $10 next year. I mean, you know,
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  that's not a small increase over a very short period of time. So again,
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  I think that having another score there,
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  one particularly that is more competitive, is going to be great.
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  And it's probably going to have to help a lot in,
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  in the end for the cost of the consumer and the originators are going to have to
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  bear. Okay. So you mentioned the, the three bureau partners.
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  Can you tell us a little more about the relationship between the bureaus,
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  VantageScore? Kind of how like decisioning and pricing works out? Certainly.
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  So we are an independent organization. Yeah.
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  But we are co-owned by the three national credit reporting agencies Equifax,
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  Experian, and TransUnion. Yes. Okay. And so it's been a great partnership.
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  We they actually created us for the purpose of creating a competition in this
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  space. So, you know, it's been great. We've had huge success in credit card,
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  personal loans, auto, but until this point,
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  until Pulte came out with that tweet in July,
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  we've been kind of kept out of mortgage.
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  So for now is the first time we're able to compete a mortgage and that's
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  fantastic. But no,
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  it's a great partnership and it's enabled us to really differentiate to provide
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  models that if each bureau has the same information on the file,
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  then you get the same score for each bureau.
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  And that's quite unique and really valuable as you're issuing mortgages. Yeah,
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  that definitely does sound like a valuable, like, inconsistent data there.
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  So one of the other like big headlines and press releases from the past few
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  months is the, the FICO direct model, that's another,
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  that's a competitive element in the industry.
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  I think a lot of originators are trying to figure out how,
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  how that impacts them from a pricing perspective.
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  Can you go a little bit deeper on the decisions that originators at the,
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  at the mortgage bank level need to make about who they work with?
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  Or is there a decision to be made, or do we work with everybody?
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  Like what do we need to figure out as loan originators?
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  So we've spoken a few mortgage originators and honestly,
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  I've only read the same press releases on this new delivery model that you have.
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  Yeah. So there's a lot of things that aren't necessarily quite clear,
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  but what's interesting is that you have a system that's been around for tens of
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  years and that has been enhanced and that there have been mistakes and learned
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  from and, you know, and changes and adaptions made so that it's very,
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  very efficient and it runs at scale.
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  I think now you're talking about changing that. Yep. And introducing, you know,
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  scoring at a place which hasn't typically scored before. But also liability.
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  I mean, what happens if they calculate the score wrong?
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  How are they going to address that? Right.
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  And what is that impact going to be on the originator? That's not,
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  doesn't look good for anyone when that happens. Right.
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  And particularly if they're trying to rush this and get it done in a couple of
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  months, you know,
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  it typically takes us about nine months to make sure that when we install a new
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  model at the bureau is that it's doing exactly what it should. Right.
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  Because we want to make absolutely certain it does what it says on the tin.
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  We are all for innovation, we're all for competition.
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  But I think a lot of people are scratching their heads on how is this going to
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  work and which model is actually going to work better for lenders. Right. Yeah.
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  I think what they like is being able to choose and have different options and to
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  figure out, you know, which option's best for them. Yeah.
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  That's what I'm trying to get to the bottom of the fact.
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  There are so many people in the industry that are scratching their heads about
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  like what this, what this means for them and what, like, there, you know, this,
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  this model that's been in place for, for tens of decades as you said,
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  like how that,
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  how that changes and what new pipes and data processes they need in their
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  origination shops.
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  And so bringing clarity to the originator seems to be one of the top charges as
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  we look forward for the, for the next few months.
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  You mentioned that the speed of innovation, like may be a risk,
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  but it does also feels like the speed of innovation is something that's help
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  helping create, create change.
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  Do you think that like the introduction of you know,
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  competition to the market should slow down a little bit?
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  Or do you think we're running at the right pace?
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  I think it has taken a phenomenal amount of time to get to where we are today.
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  Yes. Right. I think, you know,
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  I think it took less time to get people on the moon than it's taken to get the
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  credit scoring market and mortgage to change. Right. So that's some perspective.
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  So the reality is, you know, it, it is good to have change,
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  it's good to have innovation, it's good to run at a decent pace. Right? Yeah.
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  But you've also gotta remember that the consequences of getting it wrong,
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  I mean, this is people's lives. This is about them getting a mortgage. Right?
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  This is a very important step.
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  You really want to make sure that before you push that button or when you,
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  before you issue that loan that everything is working the way it should. Yeah.
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  If it doesn't, the ramifications, you know, can be quite painful.
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  Do you think that means that lenders will put in place some,
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  some guardrails in the,
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  in the early days of new model adoption to make sure they're not opening their
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  institutions up for risk?
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  Or do you think there's just different origination shops will take totally
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  different approaches to their appetite for,
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  for risk or appetite for how wide the credit box is? Well, I mean,
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  the good thing is right,
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  VantageScore four has been available going back to 2017. Yeah. It's used widely.
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  It's the most used scoring credit card. It's used in personal loans, auto loans.
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  So it has a long history of being successfully used and implemented in other
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  areas. Right.
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  And also we've published the data on the historical data sets from the GSEs,
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  so there's been a lot of tire kicking.
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  So I don't think they see as much risk on that side of, of the house.
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  I think though the cogs in the machine not turning the way they should,
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  that's probably a, you know, another risk.
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  And that's probably the one with these different changes that might be more
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  heightened for them. The process and implementation risk. Yeah. Yeah.
• 15:39
  Absolutely. Alright,
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  so I saw your press release this morning and online adoption of PE of
• 15:44
  lenders using VantageScore or,
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  or signing up for the portal has been stratospheric in the last few months.
• 15:50
  Tell us a little bit more about that. Well, it's great, as you know,
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  obviously we're, we're seeing a lot of the large originators Yeah.
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  Starting to pull VantageScore in now as they're preparing for the transition.
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  We're seeing a lot of focused lenders doing the same thing, as I mentioned,
• 16:02
  those that are focused on a mission.
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  And we're also seeing those that don't just go to the GSEs but perhaps submit
• 16:08
  loans to the VA or to the FHFA loan banks have been beginning to pull our
• 16:13
  scores so that they can begin preparing their loans for those types of
• 16:16
  securitizations as well. Okay.
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  So we have an opportunity here and a platform to go kind of one-on-one
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  conversation that's, that's listened to and watched by,
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  by many I'm sure at MBA. You're having lots of conversations with,
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  with lenders and, and clients and partners. What are some of the,
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  the harder questions you're, you're getting that you need to, to answer to,
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  to bring confidence to all these people that are still, you know,
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  kind of scratching their heads about what the future of of credit reporting
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  looks like? A lot of people are a little bit, you know,
• 16:45
  when change happens that there's a level of anxiety that kicks in as you try to,
• 16:49
  it's for industry that change frequently.
• 16:52
  We don't like change very much Well, I mean, again,
• 16:55
  when you've had something that's run the same way for a long time Yeah.
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  Which would probably implemented way before you even started working at that
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  organization. Yeah. Right.
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  Where that historical knowledge of implementing it the last time is gone.
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  There's always going to be some aspects of that that are going to make people
• 17:08
  think like, whoa is this, are we ready for this? Right. But the good thing is,
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  you know, all the tools are there,
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  the bureaus are there to provide their support.
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  So once you start putting the foot in,
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  I think everybody's getting very comfortable with the support and with all the
• 17:21
  information that's available to ensure that they can make the right decision.
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  Alright. So we've talked a lot about VantageScore through the lens of mortgage,
• 17:28
  but let's talk about other lending verticals where VantageScore has had adoption
• 17:32
  and found traction. Give us a glimpse into that Rikard. Yeah,
• 17:35
  so Vantage Score 4 was launched in 2017. Yeah.
• 17:38
  So we have quite a long track record of that being available.
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  And actually as of now,
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  we are the most used credit score in the United States much because of its
• 17:47
  adoption in other products like credit cards, auto loans, and personal loans.
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  And we now have over 3,700 financial institutions that are actively using
• 17:56
  VantageScore today. Okay. So you mentioned 3,700 institutions that have adopted.
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  Can you give us an example of a large lender that's adopted VantageScore and
• 18:03
  found success? Yeah,
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  so probably one of the best known is Synchrony,
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  which is the old GE Capital. Yes, absolutely.
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  And so they adopted VantageScore four for everything they do.
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  And for them they found it to be a great success.
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  It helped them reduce the risk they had in making and issuing their retail
• 18:21
  cards, personal loans and other types of products. And so what they did,
• 18:25
  which is very clever, was that not only did they adopt it,
• 18:28
  but they're also using it for securitization. Okay.
• 18:30
  And so they had a very clever process where what they did was that they told
• 18:35
  the financial markets, Hey,
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  for a year we're going to show you both scores so you can begin and adapt and
• 18:39
  understand how these scores work.
• 18:41
  But then after these four quarters were turning it off and that worked really,
• 18:44
  really well and it started to get the investment markets more familiar with
• 18:47
  VantageScore four and how to use it. Alright.
• 18:50
  So the KPI of success in that world was measuring risk on the origination front.
• 18:55
  There are other KPIs that lenders like Synchrony use to say VantageScore
• 18:59
  has been a success. Absolutely.
• 19:01
  And you can see that in our quarterly earnings announcements. Okay. How,
• 19:04
  how many more le consumers they've been able to lend to as a result of switching
• 19:08
  to VantageScore four without increasing risk. In fact,
• 19:10
  they're able to lend to more people and they've reduced risk at the same time.
• 19:14
  Okay. So shifting back over to mortgage,
• 19:17
  do you have any advice or what would you tell originators to do now if they're
• 19:20
  interested in comparing their current credit reporting
• 19:25
  strategy to VantageScore or making the first step to this,
• 19:28
  this competitive future?
• 19:29
  I would definitely encourage them to reach out to their credit bureaus.
• 19:33
  VantageScore actually offers a customized report to help mortgage originators
• 19:36
  understand what the increase in addressable market would be,
• 19:39
  where they to switch to VantageScore. Okay. Based on their footprint.
• 19:42
  So that can help them get an understanding of the financial impact of making the
• 19:46
  switch. So that's interesting. So like the,
• 19:48
  the go to market is fueled by their existing credit bureau partner not
• 19:53
  directly through VantageScore? No, it's, it's, it's fueled on,
• 19:55
  on the originator's footprint. Okay. So if they're, for instance,
• 19:59
  an originator in Wisconsin,
• 20:00
  we can then pull what is going to be the increased addressable market for them
• 20:04
  based on their footprint in the different counties of Wisconsin. Alright,
• 20:07
  that makes a lot of sense. Well, Rikard,
• 20:09
  I can't thank you enough for taking time away from this,
• 20:11
  this busy event and this busy expo hall to have this conversation with me.
• 20:14
  It's been a pleasure. Thank you, sir. It's been delightful. Thank you.
• 20:18
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• 20:22
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• 20:26
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• 20:29
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• 20:29
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• 20:33
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• 20:36
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• 20:40
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