Since FICO introduced the FICO® Resilience Index, many experienced analysts have pondered how the validation of a new analytic predicting latent risk should differ from that of a “traditional” credit risk score. Based on collaboration with clients who have shared results with us, we’ve seen a variety of approaches taken to validate FICO Resilience Index — including some that could lead to ambiguous or even inaccurate conclusions. Structuring effective FICO Resilience Index validations requires selecting performance windows and measures judiciously to ensure they correctly capture the impact of a stressed economy, as well as allowing sufficient time for consumer resilience behavior to fully reveal itself.
FICO® Resilience Index Validation Best Practices Checklist:
- Capture the change from an unstressed to a stressed economy
- Choose a performance window of 12–24 months
- Select a performance measure of serious (not mild) delinquency
- Evaluate FICO® Resilience Index in combination with the FICO® Score (not independently)
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