More Than 232 Million US Consumers Can Be Scored by the FICO Score Suite
Using alternative data, FICO® Score suite delivers more reliable credit scores
Based on the 2020 US Census, the US credit-eligible population (those over 18 years of age) is 258 million people. But how many of those consumers can obtain a FICO® Score?
Calculations by FICO data scientists indicate that more than 232 million US consumers can be scored by the FICO® Score suite. That is 90% of the credit-eligible US population.
For most of the credit-eligible US population there is sufficient traditional credit bureau data available for calculating a FICO® Score. However, some 28 million consumers have minimal data available in their traditional credit bureau files, and another 25 million are considered ‘credit invisible’ and have no traditional credit bureau data at all. As shown in Figure 1, the profiles of these consumers that lack sufficient traditional credit bureau data can be quite varied.
To responsibly and reliably score consumers with sparse or no traditional credit bureau data requires a novel approach to credit scoring. Over the past decade, FICO has been developing innovative new scores – like FICO® Score XD and the UltraFICO® Score – which augment traditional credit bureau data with rich alternative data, such as telecom, utilities, public record, and checking account data.
With the introduction of these scores, the FICO Score Suite can now deliver reliable credit scores for more than 27 million additional people!
For comparison, we created a benchmark score that was built using only credit bureau data but that scored more people by loosening the FICO minimum scoring criteria (which results in scores being calculated even when the only data available is very sparse or stale). We refer to this benchmark score as the “Credit Bureau Data Research Score.” When we compared the suite of FICO® Scores to the “Credit Bureau Data Research Score” we found that FICO scores more people. Over one million more, to be precise.
FICO scores more people, and we do so by responsibly leveraging additional, powerful alternative data sources. There’s more to the story, though. As seen in Figure 2, not only does the FICO® Score suite deliver scores on more consumers, but the consumers we do score (relative to the “Credit Bureau Data Research Score”) are more likely to fall in the “new to credit” and “no credit bureau record/trade” segments. These segments tend to be early in their credit journey, with a strong appetite and need for credit.
By contrast, our findings show that the “Credit Bureau Data Research Score” disproportionately scores more consumers in the “credit retired” segment, which are typically individuals that are far along in their credit journey and have less interest in obtaining credit.
The “Credit Bureau Data Research Score” also disproportionately scores more consumers in the “lost access to credit” segment. This segment is unlikely to benefit from having a credit score based solely on traditional credit data, which consists largely of past blemished credit. Without positive alternative data flowing into their files to offset the negative data in their traditional credit files, these consumers will likely score too low to obtain credit. To illustrate this point, only 3% of the “lost access to credit” segment would be assigned a “Credit Bureau Data Research Score” above 620. These consumers are stuck in a catch-22. To obtain credit, they have to be using credit, but without a reliable way to assess credit readiness, lenders may turn them away. This is where FICO’s approach to scoring over 27 million additional consumers sets us apart.
By leveraging powerful and relevant alternative data that provides a more complete picture of borrower credit risk, the FICO® Score Suite helps to identify those previously non-scorable consumers who are both ready and able to take the next step in their credit journey.
For more information, visit: https://www.fico.com/en/latest-thinking/infographic/expanding-credit-access-alternative-data-fico-scores-more
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FICO® Score High Achievers: Is Age the Only Factor?
<p>FICO’s latest research on <a href="http://www.fico.com/en/blogs/risk-compliance/us-credit-quality-rising-the-beat-goes-on/" target="_blank">national FICO® Score distribution</a> 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 “<a href="http://www.fico.com/en/blogs/risk-compliance/infographic-what-does-a-high-credit-scorer-look-like/" target="_blank">FICO® Score high achievers</a>,” where we examine the credit behavioural profiles of consumers with higher credit scores.</p> <p>As expected, our latest study showed that older people generally have higher scores, as has been the case in our <a href="http://www.fico.com/en/blogs/risk-compliance/age-before-beauty-credit-worthiness-before-youth/" target="_blank">past research</a>. 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 <a href="http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx" target="_blank">FICO® Score calculation</a>.</p> <p>But for younger consumers, it isn’t too helpful to say, “just wait until you are 50 years old, and that will fix things!” Thus, I decided to dive deeper with our analysis, including looking at the credit behavioural characteristics of younger consumers with high FICO® Scores.</p> <p>In this analysis, I looked at credit characteristics for the two highest score bands, 750-799 and 800-850, which have about 16% and 23% of the population, respectively. I further broke this down by looking at the characteristics of the youngest 15% in each group, which occurs at age 29 for the 750-799 group and 43 for the 800-850. We used FICO<strong>®</strong> Score 9 for our analysis, and examined typical variables of the categories that go into the make-up of the score.</p> <p><a href="http://www.fico.com/en/blogs/wp-content/uploads/2016/10/FICO-Score-High-Achiever-table.png"><img class="alignnone size-full wp-image-29367" src="http://www.fico.com/en/blogs/wp-content/uploads/2016/10/FICO-Score-High-Achiever-table.png" alt="fico-score-high-achiever-table" width="715" height="747" /></a></p> <p>Since there’s a lot to dissect in this chart, I’ll highlight a few findings that struck me: <ul> <li><strong>Credit history.</strong> Higher scores are undoubtedly associated with a longer time on file. What’s striking is the higher average time on file for the 800+ group, both overall and for revolving accounts (the most common trade line). Clearly, it helps to start credit use early in life – but that’s not the sole determining factor for high scoring. The younger cohorts in both the 800+ and 750-799 groups have time on file medians significantly less than their older counterparts.</li> <li><strong>New credit.</strong> High credit scorers do, in fact, pursue new credit. We see little variation in months since last trade line opening and last inquiry among all groups observed.</li> <li><strong>Pay on time.</strong> As you might expect, the further in the past the delinquency, the higher the score – and that’s <u>if</u> a delinquency ever happened. 95% of the 800+ people and 72% of the 750-799 group have never been delinquent, which is a striking contrast to the 57% for the total population. The percentages for the younger groups are even higher, especially so for the 750-799ers. Collection items are also scarce for these high scorers. While 23% of the national population have collection items greater than $99, the figures are only 0.5% for the 800+ group and 3% for the 750-799 group. It is clear that, in conjunction with starting a credit file early, paying on time is a key trait of the FICO® Score high achiever.</li> <li><strong>Balance and utilization.</strong> Finally, we look at how credit is being used, focusing on revolving product use. (Since most people only have one mortgage or one auto loan, variation in instalment product figures is minimal and driven by payment history, which is near perfect for high scorers, as we’ve seen.) FICO® Score high achievers tend to have more open revolving accounts. While the % active trades and utilization are generally lower, by no means do high scorers avoid the use of credit products. What drives the difference here is the amount of <u>available</u> revolving credit utilized. The 800+ group is roughly 1/4 of the national median, both in total and on their highest utilized card; they also have lower balances and more cards<em>. </em>The 750-799 group is more active and higher utilized, but still only at 2/3 of the national figures. The young 750-799 group compensate with lower revolving balances and, as a result, lower utilization, which is in line with what we see for the 800+ group.</li> <li><strong>Benchmarks.</strong> I’d like to point out that while this study provides good benchmarks of the typical credit traits of the FICO® Score high achiever, individual credit profiles will vary widely. And keep in mind that when we sort groups of consumers as a whole by different behaviours, some results may look superficially odd. For example, the 800+ band has a longer median average open account time (128 months) than average revolving months on file (140 months).</li> </ul> So, what do we conclude? A huge takeaway is that high scorers don’t have too much in the way of serious delinquencies and negative public record data.</p> <p>In most respects, the young 800+ people are like their peer group. They really only differ markedly in their shorter credit history and higher non-mortgage balance, both of which are a function of life stage. Our results show that you don’t have to be a credit product hermit; these high scorers have more credit cards. The takeaway is to start credit activity early and maintain well-managed and moderate usage.</p> <p>In many ways, the young 750-799 people are more interesting because their age profile is much younger. Their credit characteristics differ more from their peer group, particularly in terms of length of credit history. They compensate by having almost pristine credit records and lower balances.</p> <p>Ultimately, 39% of US consumers are FICO® Score high achievers, which they accomplish by following common-sense credit practices. It ain’t rocket science!</p>
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