Tag Archives: FICO Score FAQ

Risk & Compliance Myth Busting with Clever Girl Finance and Jenelle Dito, FICO® Score Open Access Program

Mar112019

Bola Sokunbi of Clever Girl Finance recently chatted with Jenelle Dito, Director, FICO® Score Open Access program, for her podcast episode ‘Dispelling The Most Common Credit Myths’.  Jenelle shared her personal story with money, what she learned in the process of her own money challenges and how people can empower themselves with credit knowledge. This follows the FICO Score Open Access program hitting an important milestone!  The program now reaches more than 300 million consumer accounts, provides free access to the FICO® Score used by lenders for credit decisions and the factors that affect them.  Participating institutions deliver the scores to their customers via a variety of channels, including online banking websites, mobile applications and paper statements.  More than 170 financial institutions participate in the FICO® Score Open Access program including eight of the top 10 credit card issuers.  The FICO Score is the standard measure of U.S. consumer credit risk used in more than 90 percent of consumer lending decisions in the U.S. In addition, FICO® Score Open... [Read More]

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Risk & Compliance U.S. Credit Scoring Trends to Watch in 2019

Feb252019

After a 2018 that had its highs and lows, what might 2019 have in store from a credit risk management standpoint?  Here are four key developments in credit scoring that we will be keeping an eye on in the new year: Consumer-Contributed Data Takes Center Stage Momentum is high in the consumer-contributed data space: consumers are getting more comfortable with sharing their data, provided they are presented with clear benefits for doing so.  Mandates, such as the Revised Payment Services Directive (PSD2), are ushering in the era of Open Banking around the globe.  Additionally, developments, such as the recent launch of the Financial Data Exchange (FDX), point to increasing collaboration between financial institutions and data aggregation vendors (such as Finicity, Plaid, Quovo, and Envestnet | Yodlee) to facilitate secure and efficient transfer of consumer-permissioned financial data. In 2019, enhanced credit underwriting via digitally contributed-consumer data will hit the mainstream.  With... [Read More]

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Risk & Compliance Do Consumers Seek More Credit After Their Score Recovers?

Jul202017

In a previous post, we noted that the majority of consumers who had a 7-year-old delinquency purged from their credit file saw improvements in their FICO® Scores. Now let’s look at whether these consumers’ credit-seeking behavior changed after the delinquency was purged and their score recovered. Were they more likely to apply for credit? Get approved and open new accounts? To assess this, we looked at the proportion of the “delinquency purge” population (those that had a delinquency removed from their credit report between May 2016 and July 2016) that had a new inquiry or opened a new account in the three months following the purge window (August through October 2016). In Figure 1, we compared those values to the same period a year earlier, to avoid capturing seasonal changes in credit habits. The data showed that there was a minor increase in the percentage of consumers that had a... [Read More]

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Risk & Compliance How Do FICO Scores Bounce Back After Negative Credit Info is Purged?

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Jun052017

In the depths of the Great Recession, tens of millions of consumers had lapses in meeting their credit obligations. Some seven years down the line, those missed payments are being purged from credit reports in accordance with the Fair Credit Reporting Act, and these consumers may now be looking at a clean (or at least cleaner) slate. To find out how the FICO® Scores of these consumers might be impacted by this negative information being purged, FICO conducted research on a random representative sample of the 28 million US consumers who had a serious delinquency (defined as 90 or more days past due) between 2009 and 2010. This sample was divided into two groups: Those who had a delinquency removed from their credit report between May 2016 and July 2016. We’ll refer to this group, which numbers about 6 million nationally, as the “delinquency purge” population. Those who did not... [Read More]

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Risk & Compliance NCAP Public Record Removals Have Little Impact to FICO Scores

May172017

The National Consumer Assistance Plan (NCAP) is a comprehensive series of initiatives intended to evaluate the accuracy of credit reports, the process of dealing with credit information, and consumer transparency. As a result of NCAP, in July 2017, the three credit reporting agencies (CRAs) are scheduled to make required changes to the criteria used to accept the reporting of a tax lien and/or civil judgment. It is anticipated that civil judgments and some tax liens will be removed from consumer reporting agency (CRA) data when this goes into effect, including previously reported tax liens and/or civil judgments that do not meet the new NCAP-related reporting requirements.  All credit scores that utilize CRA data will be impacted, including but not limited to FICO® Scores. FICO recently conducted research on the most widely used FICO® Score versions at all three CRAs to assess the impact of the NCAP-driven removal of public records... [Read More]

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Risk & Compliance Truth Squad: Can Scoring Rental Data Vastly Improve Credit Access?

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May102017

There has been much discussion and several studies over the years regarding the potential value of leveraging rental data in assessing consumer credit risk. Which raises the question: Should rental data be widely reported to the three primary consumer credit agencies (CRAs)? If rental data was reported, this might mean some consumers without loans or credit cards would get a FICO® Score, and gain access to more affordable credit. But how many? And how many of these consumers would be considered creditworthy by prospective lenders? In 2015, FICO introduced FICO® Score 9, which scores rental data. This coincided with the first evidence of sufficient positive and negative rental data at the CRAs, a necessary condition for adding this data into the FICO Score algorithm. Great news, right? Well let’s take a deeper look at some of the facts around rental data in the credit report. Not Enough Rental Data in... [Read More]

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Risk & Compliance Truth Squad: Will Looser Scoring Standards Help Millions More Americans Get Mortgages?

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Nov152016

Access to credit and the path to homeownership are important parts of the American way of life. That’s why it’s critical to understand what can be done to improve financial inclusion — and what won’t work. For months now, the three main US consumer reporting agencies – through their VantageScore business – have been claiming that millions of credit-starved Americans can get access to mortgages through the “innovation” of simply eliminating long-standing and essential minimum credit scoring criteria. This isn’t innovation, and it won’t help borrowers.  It’s time to set the record straight. Claim: By loosening the minimum scoring criteria, VantageScore can give millions of currently unscoreable Americans a credit score, making them mortgage-ready. Truth: Scoring sparse and old data may give more Americans a score, but it won’t help those Americans who are actually seeking homeownership credit.  Even worse, it locks millions of Americans into unfairly low scores. To... [Read More]

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Risk & Compliance Credit Behaviors of “Unscorables” (Hint: They Aren’t All Alike)

Nov052015

What are the credit behaviors of the millions of US consumers who don’t currently have FICO® Scores? We’ve just published new research on how to safely and responsibly extend credit to these “unscorable” consumers. As part of that study, we took an analytical deep dive to better understand their credit behavior. Since our goal was to help expand credit access, we focused on those within this group who actually apply for credit. These are the consumers for whom extending scoring can make the greatest difference, and we wanted to be able to more accurately assess their credit risk. We found that these consumers differ from the mainstream credit population—and from each other. As a whole, unscorable applicants are more risky. Their overall default rate is almost three times higher than for scorable consumers. Yet risk levels vary considerably within this population. The graphic below shows unscorable applicants separated into risk... [Read More]

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Risk & Compliance US Credit Quality Continues To Climb – But Will It Level Off?

Aug182015

According to the latest national distribution of FICO® Scores, US consumer credit quality has continued the slow-and-steady climb we’ve seen over the last few years. As we’ve observed for several years now, more consumers are scoring 800 or above—19.9% vs. 19.6% just six months earlier. And fewer consumers are scoring below 550. In fact, there’s been a clear pattern of decline in this segment since the low point of the economy in late 2009/early 2010. Some of this trend may be a result of the lowest-scoring consumers “dropping out” from traditional credit usage, and by extension no longer having valid FICO® Scores. Still, this decline is encouraging. It indicates that overall more consumers using credit are managing it responsibly enough to not be among the lowest scorers. In addition, the national average FICO® Score is currently at an all-time high since we’ve been tracking this metric, dating back to pre-recessionary... [Read More]

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