Are FICO® Scores the Same Around the World?

We are often asked if a FICO® Score is calculated the same around the world. While FICO Scores have been made available for use in over 40 countries across five continents, they are not all the same for many reasons – but let me elaborate.

The Similarities

For over 35 years, FICO has kept a consistent goal globally for FICO® Scores – to leverage credit bureau data to extend credit access while applying its proven methodologies; and to accurately rank order risk in a consistent, explainable, and transparent manner. FICO pioneered the credit scoring model and has decades of experience and innovation that we apply worldwide to FICO® Scores.

Globally, most FICO® Scores for consumer credit risk adhere to the standard range of 300-850 and focus on five key categories of predictive credit bureau data:

1. Payment History - how borrowers paid accounts over the length of their credit
2. Outstanding Debt - amounts owed by borrowers or how much debt is carried
3. Credit History Length - length of a borrower’s credit history
4. Pursuit of New Credit - credit accounts most recently opened by a borrower
5. Credit Mix – types of credit loan accounts where a borrower has experience like credit cards, retail accounts, installment loans, and mortgages

^{Figure 1 All five categories of predictive characteristics are considered when calculating FICO® Scores. Note: This is a typical distribution illustrated but percentages vary based on country and data availability.}

Another core element of any FICO® Score is its explainability and transparency. For every FICO Score calculated, up to four reason codes are provided to indicate why the credit score is not higher, which lends insight to the factors having the largest negative impact on a person’s credit score. These reason codes offer guidance to financial lenders and borrowers to understand how a credit score may be improved over time and guides lenders to direct additional investigations, enhancing the credit decision.

The Differences

While there is significant overlap in the design blueprint of FICO® Scores, there are several variations from country to country:

Odds to Score Relationship

FICO® Scores are designed to rank order risk, where the higher the score, the better the odds of repayment in the future. This means that as the credit score increases, the ratio of those that will pay their credit obligations as agreed to those who will miss payments increases. The odds-to-score relationships can vary widely by country due to variances in the overall credit risk in each market. For example, observed  default rates for credit cards range from  under 3% to upwards of 10%.  The relationship between odds and repayment in each of these markets has a very radical difference and meaning.

In any credit scoring system, both lenders and consumers benefit from a wide distribution of highly-predictive credit scores, with many opportunities to make precise decisions. Forcing alignment across countries with vastly different odds would compress the observed FICO® Score distribution, limit the operating range, and drastically diminish the effectiveness of the FICO Score for lenders in each market.

Performance Window

In developing predictive models, one key design element is determining the length of time that the borrower payment behavior will be evaluated. This is commonly referred to as the performance window, which again, can vary by country.

The most common window for our international FICO Score developments is twelve-months. This is primarily driven by the desire to be aligned with Basel standards, commonly used by  banks requiring a 90-day delinquency evaluation over a one-year period.

While a FICO® Score may be developed on a particular performance window, we encourage  credit grantors to validate using performance definitions that are most appropriate for their credit portfolio – even if it is different! The FICO Score has proven to rank order risk on different performance window definitions.

Product Inclusion

Worldwide, data captured in a credit report is similar, but entities that contribute data and the types of credit accounts reported can vary significantly in content and quality from country to country.

When we begin the work of deploying a FICO® Score to a new region, detailed research is conducted to understand the credit landscape and thorough data analysis is performed. This includes a review of the product types reported to the credit bureau, the frequency of information reported; and gaining  an understanding of the lending instruments in market.  The goal is to understand how credit risk is evaluated from a lender perspective and the responsibility and expectations of the borrower for repayment. It’s key to determine where borrowers have been extended credit and how they had the opportunity to demonstrate their ability to repay the debt.

Counting Enquiries

A request to review a consumer’s credit report is commonly recorded by a credit reporting agency as an enquiry. There are two distinct types of enquiries:

• Soft Enquiry - Informational review, such as a consumer reviewing their report for accuracy
• Hard Enquiry - Driven by an application to obtain credit, like applying for a credit card.

This is important to distinguish as enquiry logic varies by country. Our goal is to focus on hard enquiries where a request for credit is being made as it is a predictive element within a FICO® Score. The logic on how hard enquiries are counted is mainly directed by the data captured and the granularity of information at the credit reporting agency. The approach in many countries outside of the US and Canada is to bypass a 14-day window prior to scoring. This is applied to avoid any negative repercussions for someone making multiple enquiries while shopping to obtain the best deal and rates when applying for credit.

Minimum Scoring Criteria

The overall goal of minimum scoring criteria is to ensure the credit scoring system's robustness and accuracy. Borrowers with limited account detail or dated credit histories lack sufficient information in their credit report alone to enable an accurate assessment of the level of repayment risk they present to a lender. If the information available in the credit report does not meet the minimum scoring criteria, a FICO® Score will not be calculated.

A minimum scoring criterion is established based on country-specific and/or market-specific information. This is primarily driven by the types of lending products included in the credit bureau, the frequency that the lenders contribute data to the database, and whether other non-lending types of data are also included. Wherever possible, empirical analysis is conducted to ensure that scores generated on the population meeting the minimum scoring criteria are robust and accurate.

The bottom line is that the FICO® Score is developed in the most optimal way to create an effective credit score for each market. Our drive to create the best-in-market solution creates differences among countries but none that jeopardize the solution’s ability to accurately assess consumer credit risk.

Learn more about FICO® Scores for International Markets and contact us at globalscoreservice@fico.com