An inside look at 2 new credit scoring models

© Can Stock Photo / kvkirillov

Ever since the concept of loaning money was conceived, lenders have been trying to find the ideal way to predict who will pay them back and who will default. Over time, methods for evaluating the likelihood of borrower repayment progressed from individual human judgment calls to more objective credit bureaus and reports.

In the 1950s, credit-scoring formulas were developed to calculate risk numerically based on factors like timeliness of payments, debt-to-income ratio, and length of credit history, but those factors have been refined over time. The first Fico score was introduced in 1989 and widespread use of scoring exploded. Now there are sophisticated variations of Fico for specific industries, as well as different scores from Experian, Equifax, TransUnion, VantageScore, LexisNexis, and more.

Today, scores often determine not only whether consumers can get loans or credit cards, but how much they’ll pay for car insurance, whether a landlord will rent to them, and if an employer will hire them. As these three-digit scores are so influential, attempts are continually being made to ensure they are as accurate and fair as possible. This year, two new scoring systems have arrived: UltraFico and Experian Boost.

Both tools are:

So what’s the difference?



Whether these enhanced scores improve underwriting results by allowing lenders to tap into markets that would previously have been missed — or increase losses by putting marginally qualified consumers into risky loans — remains to be seen. What’s indisputable is that lenders will continue to try to predict who will repay and who will not, and credit scoring systems will undoubtedly continue to evolve.

As VP of finance company markets for State National Companies, Mark Baltuska leverages more than 15 years of industry experience to work with finance company professionals to understand their portfolio risk challenges and help them find solutions. State National Companies, a division of Markel Corp., is the Customer Experience partner of Auto Finance Excellence (, a sister service of Auto Finance News.

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