VantageScore’s Parting Shot at FICO
While it has never stunted the growth and adoption of the VantageScore® model in the marketplace, a nagging frustration has been a lawsuit filed in 2006 by FICO against VantageScore Solutions. From the beginning, FICO’s lawsuit was focused on quashing VantageScore Solutions – their only true competitor, absorbing resources and stifling innovation, all of which does nothing to help educate consumers about credit scores.
FICO’s lawsuit has been wholly rejected by a U.S. District Judge, a federal jury, and now I am happy to report that the U.S. Court of Appeals for the Eighth Circuit issued a conclusive opinion affirming all earlier decisions.
Among FICO’s claims were anti-competitive behavior and trademark infringement. It is ironic that an 800 pound marketplace gorilla would accuse a start-up of anti-competitive practices. As for FICO’s trademark infringement claims, not only did the Eighth Circuit affirm that the claim was baseless, but affirmed the jury’s decision that FICO’s trademark registration of its numeric scale was fraudulent.
While I am very pleased with our third complete victory in this matter, I am still deeply concerned that it has bred misinformation. So I’d like to set the record straight on a number of points:
TRUTH: The VantageScore model and the various FICO score models are among dozens of credit score models used by lenders to assess a consumer’s creditworthiness. It is inaccurate to insinuate that consumers only have “one score.” This fact was explicitly made by the Consumer Financial Protection Bureau’s recent report to Congress, which stated that, “Lenders use credit scores that are produced by many different scoring models,” and that, “A consumer, unaware of the variety of credit scores available in the marketplace, may purchase a score believing it to be his or her “true” (or only) credit score, when in fact there is no such single score.”
TRUTH: VantageScore is not a “look alike score,” and in fact doesn’t even use the same scale as FICO. VantageScore’s scale is 501 – 990 while FICO’s scale is 300 – 850. Due to lenders’ existing systems, a three digit score is easiest for lenders to implement – so credit scores are typically three digits.
TRUTH: VantageScore is sold and used by lenders. Billions of credit-related decisions are made annually by lenders using the VantageScore model and those who would insinuate that the VantageScore model is not used by lenders are misguiding consumers. Indeed, when VantageScore was first introduced it raised the bar for credit score models overall. This underscores why many of the largest lenders use the VantageScore model, including four of the top five financial institutions, five of the top five credit card issuers, two of the top five auto lenders, and one of the largest mortgage lenders in the country. Recent media reports disclosed that banking giant Chase adopted VantageScore. Secondary market participants including Fitch and S&P also rate securitized loan package issues where the loans are based on the VantageScore model.
- TRUTH: VantageScore Solutions believes that consumers should have a clear understanding of their creditworthiness. We want consumers to understand how their score is interpreted by lenders so we’ve provided consumers with an easy-to-understand “A through F” academic letter grade that correlates with our 501 – 990 scale. Intuitively, VantageScore credit scores that fall within the 900’s on our scale correlate with the letter grade “A,” while those in the 800s correlate with the letter grade “B.” The correlation continues through “C” and “D” and VantageScore credit scores below 600 correlate to the letter grade “F,” which would signify to consumers that lenders view them as significantly risky. When consumers receive a VantageScore, they will receive both the three-digit score and the letter grade.