MBA Supports Re-Evaluation of Credit Scoring Model | FICO vs VantageScore

After opening the issue to public comments in December, the Federal Housing Finance Agency is moving to re-evaluate accepted credit scoring models. The scoring models under consideration are Classic FICO, FICO 9 and VantageScore 3.0.

Hotly debated in industry publications and by major stakeholders, the credit model reconsideration has drawn the support of the Mortgage Bankers Association which commented in a statement on March 30 that “New models may result in more borrowers qualifying for scores, or higher scores for certain borrowers who already have scores. In either case, it is possible that these borrowers will be able to access more products or obtain credit at a lower cost.” While not explicitly stated, the MBA comments hint at the harms of a credit scoring monopoly and encourages competition as a way to “[stimulate] innovation and [lower] costs.”

Several consumer and civil rights groups—including the National Consumers Law Center, NAACP and National Association of Consumer Advocates—have also offered feedback on the credit scoring debate. In a letter to the FHFA, the group offered support for moving to the FICO 9 model, saying it is “somewhat preferable because of its better treatment of unpaid medical debt.” The group went on to say that the opposing argument of forgoing change due to the “potential cost for the GSEs and industry” is to be expected and is “no reason to avoid progress.”

While it is unlikely that a decision on the new credit scoring model will be made before mid-2019, Janus is closely following the developments on this issue. Check back soon for the latest updates.

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