Intern Corner: Are Two Scores Better Than One?
Over the past summer, Andrew Davidson & Co., Inc. (AD&Co) was pleased to have Stephanie Duenas and Anika Chatterjee interning with us at our office in New York City. During this time, Stephanie and Anika performed a detailed analysis of mortgage performance data to consider the question of whether and how two credit scores, when available, could provide lift over a single score in predicting mortgage delinquencies. Given Bill Pulte’s recent announcement that all securitized products issued by the GSEs will include both a FICO score and a VantageScore, their research is especially timely and relevant.
Stephanie and Anika’s full paper describes their approach and compares the performance of several credit-score based models in detail. It should be noted that the usual caveats, due to historical GSE qualification based on Classic FICO, apply here, especially when looking at the performance of individual score models; minor differences are unlikely to be meaningful. However, the primary outcome of this research is that the use of both scores, when available, can provide significant lift over the use of any single score. More detailed extensions of this analysis are ongoing, for example: (i) How do other potential combinations of scores compare with those analyzed here; (ii) How can AD&Co’s credit models, which also account for variables such as LTV and DTI, make the most effective use of multiple scores; and (iii) How does the analysis change when using FICO 10T instead of Classic FICO. Meanwhile, find Stephanie and Anika’s paper linked below.
This paper will be a valuable resource for your work. If you have any questions or would like to discuss the content in more detail, please contact support@ad-co.com.