Latest / Market Pulse / A Lender’s Case for VantageScore

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A Lender’s Case for VantageScore · Market Pulse

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  .
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  Welcome to the Market Pulse podcast from Equifax,
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  where we break down the latest economic and credit insights to help you navigate
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  today's business landscape.
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  Welcome to this special edition of Equifax Market Pulse podcast. I'm Ashley,
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  senior Vice President Mortgage sales leader,
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  and I'm honored to host this conversation with one of the most insightful voices
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  retail lending. Jordan Sullivan,
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  director of Retail lending at CSL Financial.
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  No corner of our industry is seeing more change right now than the
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  credit scoring ecosystem since the FHA announced its decision to welcome
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  VantageScore into the mortgage scoring process.
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  CSL Financial is one of the first lenders to use VantageScore for underwriting.
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  Jordan, I just want to say thank you so much for taking time with us today.
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  Thank.
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  You very much for having me on. I appreciate that.
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  But first, let's get an economic update from Moody's Analytics.
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  The Federal Reserve is in for an interesting year in 2026,
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  but it started on a quiet note. As expected,
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  the rate setting Federal Open Market Committee held its target range for the
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  federal funds rate between 3.5% and 3.75%.
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  At its January meeting, inflation is elevated,
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  but doesn't appear to be accelerating.
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  Some of the price hikes from tariffs have made their way through to consumers,
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  and the FOMC will continue to bet that any additional tariff induced inflation
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  will be temporary.
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  This is consistent with our baseline forecast as we expect that growth in the
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  core PCE Deflator will top out at 2.9% in the second half of this year,
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  up from the latest reading of 2.8%.
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  And while it may be a difficult time to be on the job hunt right now,
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  layoffs remain relatively subdued, and this is affording the FOMC,
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  the ability to be relatively patient when it comes to monetary policy.
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  The economy advanced at a solid pace in late 2025,
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  and our tracking estimate of incoming data in the fourth quarter suggests that
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  real GDP grew at just under 3% and stimulated fiscal policy
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  and the lagged effects of previous rate cuts will deliver a jolt in the first
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  half of this year as well. As a result,
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  the majority of the FOMC is not seeing an economy that is in need of immediate
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  support,
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  but we do expect that a few more weak job reports will persuade the
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  committee to cut the Fed funds rate by 25 basis points when it meets again in
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  March. And after that, we assume two more 25 basis point cuts for 2026,
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  the gradual pace of rate cuts and heavy fiscal borrowing will limit the impact
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  that overnight rates when their lower will have on the yields of longer
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  dated treasury securities, which are typically used to price mortgages.
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  We expect that the yield on tenured treasuries will remain range bound between
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  four and 4.5% for the foreseeable future,
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  which is roughly consistent with our estimate of its long run equilibrium.
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  But the stubbornness to decline further will keep upward pressure on the 30 year
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  fixed mortgage rate. However,
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  an announcement in January by the Trump administration outlining instructions
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  for Fannie Mae and Freddie Mac to purchase $200 billion in mortgage backed
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  securities will likely compress mortgage spread somewhat in the near term.
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  The spread has declined by about 20 basis points since the announcement,
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  but we expect the spread to bottom out at about 180 basis points by the end of
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  the year without additional MBS purchases.
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  The housing market will therefore gradually improve this year as lower rates
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  modestly stoked demand,
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  but affordability concerns will remain a key limiting factor.
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  Thank you, Justin. To start could you,
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  could you please give our listeners just a brief overview of who CSL
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  Financial is, your core mission and the philosophies behind your motto,
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  common Sense Lending?
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  Yeah, thank you.
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  Our core mission obviously CSL Financial CSL stands for Common Sense Lending,
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  and our core mission is to provide housing opportunities for individuals looking
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  to purchase manufactured homes.
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  So we primarily do what we consider called chattel lending and we provide
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  financing for individuals who are looking for alternative to the standard brick
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  and mortar sticks and bricks type found out foundation homes that other buyers
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  are looking for.
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  So our philosophy here at Common Sense Lending is to use practical lending
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  guidelines that are easy to understand and follow for both our retailers,
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  our borrowers, and for our employees as well.
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  So we try to make the process simple. .
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  Yeah, I love that.
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  I absolutely love easy processes for sure.
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  So you've established a significant presence here in
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  manufactured home industry.
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  What drew CSL to this vital market segment,
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  and what unique challenges and opportunities do you see in serving hardworking
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  families with varied credit profiles?
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  So what really brought CSL financial to the marketplace was a
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  need for simple simplified financing for manufactured homes
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  lending with programs that actually are for the borrowers that make up the
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  marketplace for manufactured homes.
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  One that the borrowers could understand our program to understand our
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  guidelines. So we just wanted to try and make it simple and reliable.
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  One of the challenges we face, obviously,
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  is the same challenge I think everybody faces,
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  and that's that regulatory climate that everybody has problems with,
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  and it's always seems like it's always changing,
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  and they're always adding stuff or taking stuff away.
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  So I would probably say that's one of our biggest challenges in today's
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  environment.
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  But what we're trying to do is we're trying to play catch up with that.
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  Another unique challenge that we see every day is that the borrowers that don't
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  fit a traditional credit profile with either a thin credit profile or a skinny
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  credit profile,
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  or a derogatory credit on their credit report we want to make sure that we're
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  providing them the opportunities for home ownership.
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  So one of the things that we saw was when FHFA approved the use of the Vantage
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  scoring models,
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  we wanted to make sure that we took advantage of those scoring models to help us
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  maybe gain that competitive edge over our competition so
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  that we could kind of help win to those people a little bit better and make sure
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  that our portfolio's a little bit stronger. And then we also,
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  the other thing that we saw was the families and the borrowers that are using
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  our services,
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  we found out that they typically have gone out to one of the credit monitoring
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  services. Several of 'em out there. I won't name any of 'em by name but they're,
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  everybody knows who they are.
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  And what we found out is that they used the Vantage scoring models as well.
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  A lot of 'em used the Vantage 3.0 or have used the Vantage scoring models
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  previously. So the borrowers are real familiar with those scores.
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  And what we saw was a ever widening gap between the old scores and the auto
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  oh fours and 90 eights to what the VantageScores were being used in those
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  monitoring services. So we would constantly get those questions of, well,
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  I thought my credit score was 850 and now you're telling me it's 650.
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  So what we wanted to do is we wanted to be able to have scores that were more
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  relatable to our borrowers so that we didn't have that challenge of having to
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  explain what was going on with the credit scores and,
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  and things of that nature to the borrowers and just make it simplified process
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  and make it easier for them to understand what's going on as well.
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  Nice.
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  And when did you start utilizing VantageScore in your underwriting process?
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  We started using the VantageScore right around 2023.
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  We had used the other scoring models,
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  obviously the FICO 98 Classico four Beacon, but in 2022,
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  we started exploring ways to save money and acquire better predictive scoring.
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  And so when we met with Equifax, they said, Hey,
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  we've got a great product that we're just coming up with.
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  We've been using the Vantage 3.0 Scores for a while but we have a Vantage 4.0
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  model that we'd like to start using. We're trying to get it approved.
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  And so we said, well, let's look into it. Let's make, see,
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  let's see if it makes sense to us. Let's see if it, you know,
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  show us how it's better.
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  So Equifax put together a couple of reports doing some research using
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  scoring models from a cross section of our borrowers and our borrower profile.
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  And we saw that the vantage scoring model was a better predictor of that credit
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  risk than the other models we had used before were.
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  And so around 2023,
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  we began using the Vantage 3.0, and then obviously we had to,
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  to wait for our LOS or one origination software to kind of catch up
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  with those scoring models.
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  So as soon as they were able to include the Vantage 4.0 model into their
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  software, we immediately added it.
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  And I want to say that was probably wait 2023 was whenever we
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  finally got all of that engineered and going together. So
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  but we've enjoyed using it.
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  And with the information that we gained from our studies showing that it was a
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  better predictive model, we said, why, why don't we start using this?
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  Yeah, that makes complete sense.
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  So shifting a little bit,
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  VantageScore is positioned to help lenders qualify up to 10% more borrowers.
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  How does this, in addition to the 24-month trended data view,
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  provide the visibility needed to confidently approve a borrower who
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  might have been missed by a limited snapshot model?
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  Well, in risk-based lending,
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  it's always important to know whether your borrower's credit is improving or
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  declining,
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  not just how many late payments they had or where those late payments have
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  fallen, or what type of of credit those late payments were attached to.
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  So the trended data really helps us visualize and explain this in a way that's
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  understandable to our borrower and to our loan officer.
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  We have a lot of new young loan officers,
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  so they want to kind of see why these credit reports are scoring it the way they
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  do.
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  So having that trended data in there helps them and also helps them explain it
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  to our borrowers. So it's been very, very helpful to see those trended
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  views. Our pull through during this time as you had kind of alluded to,
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  of 10% more borrowers are being able to be qualified,
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  we've actually seen our pull through from 2022 to 2025 increase from
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  about 8% to about 20%. So we've definitely been able to see that,
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  that pull through come through.
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  And where I think we've gained that competitive edge is being able to grab those
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  borrowers that had a thinner credit file,
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  or maybe even those that had the delinquencies,
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  but those delinquencies were further back in their credit history and weren't
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  really indicative of what they're going through at the current moment.
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  So that trended data was really helpful in, in improving that score.
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  And what we've seen is we've been able to approve those and get those loans on
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  our books while we've maintained a lower delinquency ratio
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  with those credit scores as well. So we're kind of following those on other,
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  they're newer loans,
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  but they haven't gone as delinquent as fast as some of the loans in the past.
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  Wow, that's awesome. So as you've mentioned earlier,
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  you specialize in manufactured home industry a sector serving hardworking
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  families who sometimes have, as you've mentioned,
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  thin or non-traditional credit files. Right. and so, and and,
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  and you've mentioned, you know, through the conversation how, you know,
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  leveraging Vanish score has impacted your ability, you know, to deliver more,
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  more loans.
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  But how has that specifically impacted your ability to fulfill your mission of
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  giving clients an equal opportunity?
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  Well, I think it's really kind of helped us because the scoring models we see
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  throughout the marketplace and the monitoring agencies.
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  So the borrowers kind of know what they're going to be approved at as they kind
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  of move in with us. So we kind of lay out, you know,
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  they already know what their scores are going to be similar to each other.
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  It can also look at that skinny credit file,
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  and I think it does a lot better job at,
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  at predicting a score or giving you that predictive scoring with the
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  VantageScore versus one of the other scoring models,
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  because it just puts more emphasis on kind of what's here and now versus
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  what the borrower has really done in the past.
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  So we've really been able to get in touch with those skinnier borrower,
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  those skinnier credit files those files that don't have a lot of depth,
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  but they've all of a sudden started.
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  So those hardworking people that are monitoring their credit,
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  that are trying to build those credit files, it's given those people scores.
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  So we're able to go out and kind of approve those borrowers a lot more than
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  I think our competition does.
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  And we can see that because we can kind of see who's pulled the credit reports
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  in the past with the, with the previous pools,
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  and we know that they've been pulling those credit reports through other
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  scoring models and we're not approving them.
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  And however we've been looking at those and thinking and seeing those going,
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  man, this person's been working hard to improve their credit,
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  get better credit scores,
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  let's go ahead and give them an opportunity to get approved and,
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  and show us what they, what they're able to do.
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  So we're able to take that borrower and fit them into our programs our limited
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  credit profiles, our derogatory credit profiles a little bit better,
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  kind of help those people that have been trying to recover their credit a lot
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  better as well.
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  I am going to ask a sidebar question. So the question I have is, is,
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  you know, you talk about, you know, you talked about the fact that you,
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  you've been able to generate, you know, a greater you know,
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  qualifying more consumers. And you mentioned, you know,
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  instead of what Vantage is saying from a 10%, you're seeing more of a 20%.
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  Are you seeing that in a specific demographic? Meaning like,
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  are you seeing more from a millennial perspective,
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  or is it really kind of widespread from thin, you know,
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  thinner no credit consumers are,
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  are they in one segment area that you're seeing more, more than others?
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  No, not really. We're seeing it across the board through everybody.
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  I do think that we're seeing our ability to approve those people with a thinner
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  credit file and a lot more, and those are probably your,
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  your millennials or your newer generation borrowers. The,
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  I would say, you know, currently probably the 25 and under crowd.
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  But then what we're also also seeing is we're also seeing those thinner credit
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  files, especially on the older people, the 60,
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  70 plus age categories that have thinner credit profiles where
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  they've taken their retirement and they've paid everything off and they haven't
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  needed to finance anything.
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  And now they're coming back to the marketplace going, well, you know what?
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  My granddaughter needs a home. I want to buy it for her.
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  Or I want to move out of my, you know, falling apart one,
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  spend the last few years of my life and in a nicer home,
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  I retire into a nicer home.
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  So we're seeing those people with thinner credit files,
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  so we're also being able to approve them as well.
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  So we're kind of seeing that across the board. And then, you know,
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  we're, we're really also seeing is those people that have a full credit file
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  we're able to see, I, we, we feel,
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  and we see those scores being able to be populated for those people just as well
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  and giving us kind of a better predictor of that. Are they moving from like a,
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  a b credit to an a credit category,
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  or are these people starting to really load up on their debt with that trend
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  analysis, and are they moving from that a category down to that B category?
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  So we're able to kind of see that as well too.
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  So it's kind of helping us across the board kind of in all markets of our,
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  of our sales.
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  Thank you for sharing the move by f the Federal Housing Finance Agency FHFA to
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  adopt VantageScore 4.0 Marks a significant shift towards affordability,
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  that projected,
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  that's projected to deliver 600 million plus in savings to lenders and
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  borrowers. For lenders who are hesitant or slow to adopt,
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  how would you reframe non adoption,
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  not just as a missed opportunity, but as a competitive disadvantage?
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  The cost of it,
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  we've been able to see cost savings using the vantage scoring versus what the
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  cost of the other scoring models are. Over the past two years,
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  I would say we've probably saved close to a hundred thousand dollars just in our
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  expenses alone. So from,
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  so one advantage to adoption of doing adopting it very quickly was we were able
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  to start seeing our own cost savings
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  change almost immediately overnight. So our,
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  the cost of our credit especially for those that we don't recoup such as
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  declined loans or withdrawn loans we've been able to see recoup
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  those costs very quickly and not have to have such a high expense on that. So,
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  so one of the things I would tell other, other lenders is saying, Hey,
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  if you want to try and keep your costs down these,
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  these scoring models tend to be a little bit cheaper or less expensive so you
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  can immediately see a return on your investment there.
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  Also I think with these credit report, with these credit scoring,
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  with the vantage scoring we are capturing several areas of the marketplace where
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  other credit score scoring models are missing especially with those
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  major derogatory or those thinner credit files.
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  So our risk-based lending approach allows us to feel comfortable with the scores
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  that we're receiving,
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  knowing there are a better predictive model than what we're seeing with the
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  other scoring models. So we really reply,
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  we re we rely on that to approve the loans that others are passing
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  up and or giving higher pricing on so that we can actually help the
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  borrower and we can feel better that we're giving the borrower a better product
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  and a better price than what our competition is.
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  So we've seen a tremendous growth and our a and b paper,
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  or what we consider a and b paper our delinquency has not been increasing in
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  these categories.
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  And one of the things that we're actually looking at is we're going back and
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  relooking at all of the, the credit before.
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  And what we're seeing is we're seeing a really ri a really big rise in our B and
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  C paper delinquency based on those other scoring models.
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  And one of the things that Equifax did was when they ran that research report on
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  us,
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  they kind of showed us that those what we considered A and A and B and B and c
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  paper was really kind of a step below,
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  and we should have been predicting that these loans were going to be going
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  delinquent,
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  whereas the loans that we're doing now are holding steady and not going
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  delinquent.
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  So it means that we're saving money on the front end of not having been charged
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  as much,
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  and then we're saving a lot of money on the back end and not having to spend
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  those expenses on servicing and collections charge offs and things of that
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  nature because the,
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  the model is just better predicted and just a better decision tool.
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  So .
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  That's amazing. Thank you so much for sharing that and going that in depth.
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  We really do appreciate it.
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  As you well know there is a focus,
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  and this is going to kind of skirt on what we were just talking about a little
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  bit, right? There is a focus on high cost origination,
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  yet credit report fees are minimal, part of the total costs, a closing cost.
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  We feel that the solution to cost isn't less data,
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  but earlier intelligence and having a true financial picture of what the
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  borrowers of, of the borrower earlier in the process.
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  So can you kind of walk us through how CSL utilizes soft
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  pool data, like a pre-qual or a pre-approval and
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  to take on a smarter risk by reducing origination expenses and
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  helping ensure your credit decisions are both reliant and accurate?
• 20:20
  Sure.
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  one of the things that we've really found out to be really helpful with us is
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  the Equifax and tele Emerge product which allows us to be able to only pull one
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  credit score and using the Vantage 4.0 scoring,
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  we found that the scoring across the credit bureaus is a lot,
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  SIM is very similar to all of the scores.
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  So that emer really helps us pick and choose, you know,
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  if somebody's going to have a low score on one bureau then they're probably
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  typically going to have that low score on the rest of the bureaus,
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  so we don't even pull those bureaus. So that's a huge cost savings for us.
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  So that inte emerge product through Equifax has just been a game
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  changer for us. But it also makes us feel comfortable that if we,
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  if we see that first score or that soft score on the Equifax report,
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  if it's going to be outside of our range,
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  we can just go ahead and deny that loan or offer all alternative financing for
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  those loans.
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  So that automatically right there saves us just a ton of money.
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  And then also over the past, so yeah,
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  so over the past few years we've saved tons,
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  tens of thousands of dollars just on that product alone,
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  so that's what's really, really been helpful to us.
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  Wonderful. Wonderful, thank you. Well, before we wrap up,
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  I do have two final questions for you. ,
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  what major innovations or strategic shifts can the mortgage industry expect from
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  CSL over the next 12 to 18 months to further drive common sense lending?
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  One of the things that we're,
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  we're looking to implement and wanting to do is the integration of the
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  employment check that Equifax now offers on the credit reports.
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  That is becoming a very efficient tool for us because we automatically know
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  where we have to go and what we need to do in order to get that V-O-E-V-O-Y if
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  we need to, you know,
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  can we go ahead and order it from the work number or do we need to swap over to
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  another product to order that.
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  So implementing that on our credit reports is a huge game changer for us,
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  implements a lot of efficiencies.
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  And then we're also working with our LOS provider to incorporate the bankruptcy
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  score and with our credit reports as well.
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  We had been using it,
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  but we switched LOS systems and the new one didn't work with it.
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  They didn't know how to handle it.
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  So now we're working with them to be able to incorporate that bankruptcy score
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  again,
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  to be able to come up with a full school card scorecard for our borrowers.
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  We think that that's just going to be invaluable and we just really appreciate
• 22:54
  those products for Equifax to be able to implement those.
• 23:00
  The other thing that we're looking forward to is really kind of expanding our
• 23:03
  online presence and our self-directed services,
• 23:07
  so our online application and then being able for the borrower to actually be
• 23:11
  able to pull up their own credit reports so we don't even have to,
• 23:14
  so they can almost get an automatic decision right there just based off of those
• 23:19
  soft scores, those soft pulls, so that the borrower can say, okay,
• 23:23
  I will be approved for this, or I won't be approved for that.
• 23:27
  And really kind of be real innovative with that and almost have the borrower
• 23:31
  kind of decision their own.
• 23:33
  So really targeting the younger generation that loves the automation. .
• 23:38
  , you know what, we've actually found that the, the,
• 23:42
  the Gen Xers you know, myself included in that category,
• 23:46
  are actually using a lot of those services a lot more.
• 23:49
  I agree. I am too .
• 23:52
  We're seeing a lot of the, you know,
• 23:53
  that 50 to 60 to 70 crowd they're going, no,
• 23:58
  just email it to me or just text it to me. Whereas the younger crowd goes,
• 24:03
  oh, I see, I saw a text message from y'all, but I, I,
• 24:05
  I texted stop to it because it was spam.
• 24:07
  And they're just so less trusting and they don't want to use that technology
• 24:11
  technological advantage. So it's kind of,
• 24:14
  it's kind of weird how it's gone through those generations like that. So yeah.
• 24:17
  It really, yeah, it really has. I agree. I agree.
• 24:22
  What final piece of advice do you have for other lenders and
• 24:27
  industry leaders who are still evaluating VantageScore?
• 24:31
  My advice is to go ahead and use the new scoring model sooner rather than later.
• 24:35
  All it's going to do is help boost your portfolio and ensure that your credit
• 24:38
  risks associated with the, your borrowers is priced accordingly.
• 24:44
  You're going to have better delinquencies, you're going to have better
• 24:49
  scorecard modeling if you start using these credit scores earlier.
• 24:53
  Many of the times in the past I've used scoring models that were not as adept or
• 24:56
  as good a predictor of the borrower which has led to pricing issues or us
• 25:01
  losing loans to our competitors.
• 25:04
  So if you want people to think of you as innovative and you want to make sure
• 25:08
  that your portfolios are kind of buttoned up and really tight go
• 25:12
  ahead and switch over to the new scoring models. Now.
• 25:16
  a lot of the research out there can show you that the vantage four is a lot
• 25:21
  better even product.
• 25:23
  So and what we've seen is it's really hard to explain those,
• 25:27
  those scoring models to our borrowers. Again, the scores that they see that are,
• 25:31
  that are public are not the scores that they're getting from you,
• 25:36
  and it just causes a lot of confusion in the marketplace.
• 25:39
  So to help your borrowers,
• 25:40
  to help your loan officers and to ensure that your loan portfolios are going to
• 25:45
  be producing, go ahead and switch over to this course now.
• 25:49
  Thank you, Jordan.
• 25:51
  We really do appreciate you joining us today and providing such a power,
• 25:55
  such powerful insights.
• 25:57
  And thank you to everyone tuning into this special edition of Equifax Market
• 26:01
  Pulse podcast.
• 26:02
  Hit the subscribe button for more conversations as we explore what happens next
• 26:06
  in lending, affordability, and credit access.
• 26:11
  The information and opinions provided in this podcast are intended as general
• 26:16
  guidance only, and are subject to change without notice.
• 26:19
  The views presented during the podcast are those of the presenter as of the
• 26:22
  date.
• 26:22
  This podcast was recorded and do not necessarily reflect official positions of
• 26:27
  Equifax.
• 26:29
  Investor analysts should direct inquiries using the contact desk box on the
• 26:33
  investor relations section@equifax.com.