Tag Archives: Score Performance

Risk & Compliance FICO® Score High Achievers: Is Age the Only Factor?


FICO’s latest research on national FICO® Score distribution shows that US credit quality continues to trend upwards, with an increasing number of consumers scoring in the highest scores ranges. Given that, we decided it was time to refresh our study on “FICO® Score high achievers,” where we examine the credit behavioural profiles of consumers with higher credit scores. As expected, our latest study showed that older people generally have higher scores, as has been the case in our past research. This is largely because they have trade lines that have been open longer, which leads to higher scores (assuming the trade lines are in good standing and all other things equal). The most credit savvy among you will remember that length of credit history accounts for roughly 15% of the overall FICO® Score calculation. But for younger consumers, it isn’t too helpful to say, “just wait until you are 50... [Read More]

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Risk & Compliance US Credit Quality Rising … The Beat Goes On


When I last blogged about the national distribution of FICO® Scores a year ago, US consumer credit quality was continuing to climb upwards, though with some potential indications of change ahead. At the end of that post, I asked: has the 7+ year upward trend started to level off? 12 months later, the answer is a resounding “no”! The number of consumers scoring in the super-prime range of 800 or above has continued to grow. In October 2015, this figure surpassed 20% of the national population for the first time since we’ve been tracking this metric, dating back to pre-recessionary 2005. In the subsequent six months, the figure continued to climb, reaching 20.4% as of April 2016. Inversely, we see fewer consumers scoring in the lowest score ranges. As of April 2016, just 20.7% of the population score 600 or below. This figure peaked shortly after the Great Recession, at... [Read More]

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Risk & Compliance Not All Alternative Data Is Created Equal


What’s the secret to scoring more of the consumers who don’t currently have FICO® Scores? Supplementing credit bureau data with alternative data, which—as I disclosed in my last post—enabled us to accurately score more than 50% of previously unscorable credit applicants. A key reason there’s an opportunity to score more consumers today is the growing number of alternative data providers that have entered the market in recent years. But not all provide equal value for credit scoring. Consider telecommunications payment data. It has many similar qualities as data reported in traditional credit files. In fact, telecom companies occasionally report customer account status to credit bureaus. Yet this information is present in less than 10% of bureau files—and when it is present, it often reflects negative payment history. More complete telecom data is available from alternative sources—and it includes positive as well as negative information. That’s important for expanding credit access... [Read More]

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Risk & Compliance Why Bureau Data Alone Can’t Score More Consumers


For any key decision, a minimum amount of information is required to make an informed judgment. Consider an airplane pilot readying for takeoff. Suppose that the radar is out, or the instruments are flickering. A responsible pilot wouldn’t proceed down the runway until having all vital information to ensure a safe takeoff. Similarly, a minimum amount of current data about a prospective borrower is required before making a responsible credit decision. We’ve previously explained the logic behind our “minimum score criteria” for the FICO® Score. But of course, that leaves millions of US consumers without scores. We recently completed research on how to safely extend credit to these “unscorable” consumers (and in my last post, I shared insights into their credit behaviors). In a key part of our study, we analyzed the 28 million unscorable consumers with bureau files having sparse or old bureau data. We wanted to find out... [Read More]

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Risk & Compliance Scoring Innovation Means More Consumer Home Loans


I recently had the opportunity to participate in a panel discussion: “What is happening with underwriting and credit standards” during The Future of Housing Finance Conference at George Washington University. One of the topics covered, which garnered a great deal of interest from the audience, was how a more predictive score will allow lenders to safely qualify more consumers for a mortgage. More specifically, the interest was around the analytic advancements within FICO® Score 9. As we’ve shared previously, new features in the score include a multi-faceted modeling approach and a more refined treatment of third-party collections (differentiating between medical and non-medical collections, and ignoring paid collections), which significantly enhance mortgage origination prediction. We recently conducted a research study to illustrate the benefit of using FICO® Score 9 for mortgage originations. We used a swap set analysis that captures both the change in consumer distribution across the FICO® Score range... [Read More]

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Risk & Compliance Does the FICO® Score Work in Both Good Times and Bad?


As I engage clients about the recently released FICO® Score 9, one of the questions that comes up frequently is how effective will the score be if it is used in a more turbulent economic period.  The FICO® Score 9 development sample was based on an October 2011 to October 2013 timeframe.  For many lenders, this represents an extremely clean vintage as losses were extremely low.  They wondered how a score developed on data that was so pristine would hold up under a more unsettled time period. Over the last 25 years, there is an extraordinary body of work that demonstrates that the FICO® Score performs well in both good economic times and bad.  Since the first FICO® Score was released in 1989, we’ve validated various versions of the score across many different points of the economic cycle and for a wide variety of industries (auto, bankcard, mortgage, etc.) for... [Read More]

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Risk & Compliance Happy Birthday to the FICO® Score!


There is nothing like a birthday to give you a chance to look back on what you’ve accomplished, and also to think about what’s ahead. The FICO® Score is 25 years old in 2014.  Introduced in 1989, it democratized access to credit by removing many of the barriers to fair lending.  For the first time, lenders could assess someone’s creditworthiness scientifically and objectively. Over the last 25 years, the FICO® Score has adapted to remaining the most predictive consumer credit score in a rapidly changing economic landscape.  Through boom times and bust, the FICO® Score has continued to be the credit score that lenders turn to year after year. While the FICO® Score works well for the 200 million Americans who have a traditional credit history, there are nearly 30 million Americans who don’t but still may need and deserve access to credit.  How will the FICO® Score of the... [Read More]

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Risk & Compliance Delivering What Customers Asked for in FICO® Score 9


What a year this is shaking out to be. We recently completed the FICO® Score 9 development at all three Consumer Reporting Agencies (CRAs) and are now working with them to make these models generally available. Now that the scores have been launched, I wanted to take a moment to summarize some of the key benefits you will see. The Voice of Customer sessions we held with our clients helped define our research focus and development objectives for FICO® Score 9. Over the several years, we’ve been researching and developing various features of the new score. Here’s a summary of some of the key features of FICO® Score 9. Refreshed – FICO® Scores are redeveloped periodically to account for a changing credit landscape and to incorporate advancements in predictive modeling. Much has happened since FICO® 8 was released – between the mortgage crisis and the ensuing recession, the credit landscape... [Read More]

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Risk & Compliance FICO World 2014 Preview — Outlook on Consumer Credit Health

FICO World 2014 logo

With FICO World 2104 just a few weeks away, we are previewing some of the upcoming sessions via webinar to whet the appetite of attendees and help the decide which sessions to attend at FICO World. One of the hottest topics on many people’s minds these days is the current state of consumer credit quality and what the outlook may be for the year ahead. Rachel Bell, Sr. Director, Analytic Consulting at FICO, will be joined by Cristian deRitis, Sr. Director, Consumer Credit Analytics at Moody’s Analytics this Wednesday October 29th at 9:00 am PDT/12:00 pm EDT/4:00 pm GMT/UTC for one hour to give a preview of recent data we collected on this important topic. Some of the questions we will be answering during our webinar are: • What key factors will drive expansion of consumer credit? • What is the impact of consumers continuing to deleverage? • What are the key... [Read More]

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Fraud & Security Cyber Security: The Streaming Analytic Battlefield


For several years, I have been actively “fighting the good fight” in the area of cyber security. Beyond my anti-fraud work here at FICO, I also participate in various industry efforts focused on preventing cyber crime, most recently joining the board of directors for the Cyber Center for Excellence. Cyber security touches our lives daily, whether it's protecting our national infrastructure, securing payment systems, or installing virus protection for personal computers and devices. The recent data breach at Target caused many to rally around the adoption of EMV payment cards. But while it’s a step in the right direction, it would not have prevented the loss of data estimated to affect more than 70 million customers. The Target breach, however, does point to the need to monitor the computer networks for malware designed to steal PII (personally identifiable information). These are costly problems for both consumers, who need to stay vigilant of any PII misuse, and to financial institutions, where an estimated $200 million will be spent just to replace...