Alternative Credit Score Aimed at Underserved Market
Fair Isaac & Co. Inc. here has created a new credit score which is generated from nontraditional sources.
Tom Grudnowski, chief executive of Fair Isaac, said the new product, FICO Expansion Score, "sets a new standard for helping the underserved marketplace."
Mr. Grudnowski and Craig Dillon, vice president for scoring solutions, told a press teleconference on the new product that there are 50 million American consumers who do not have enough data in one of the credit repositories to generate a traditional credit score.
The new product uses the same scoring range as Fair Isaac's NextGen product. In the spectrum of credit risk products from the company, the traditional FICO score comes from a data file with sufficient information. NextGen can generate a score from some files that have a thin data. The Expansion Score product works with files that have no data or thin data.
Mr. Dillon said the company has seen most of its interest in this product from the mortgage industry.
As it has launched the product, it has been in discussions with the government-sponsored agencies and others in the secondary market. While there has been considerable excitement about the product, no secondary market participant has signed off on it yet.
Another note of caution Mr. Dillon gave was not to confuse the Expansion Score with being a product for borrowers with poor credit. "This is not subprime," he said in response to a question about borrowers who are scored with this product being stigmatized.
The sources of data for the Expansion Score include deposit accounts, payday loans and product purchase payment plans. Until recently, the company said, this information has not been consistently maintained nor made accessible for use in creating credit scores.
An ideal situation would be for a bank to use the Expansion Score to acquire a customer and then send that customer's performance to a repository to help build a traditional score.
To deliver this capability, Fair Isaac has created a new subsidiary, Fair Isaac Credit Services Inc. The reports can be accessed through www.myFICO.com/business. In addition, users of the LiquidCredit Service, Capstone Decision Manager, Triad adaptive control system and Enterprise Decision Manager can use this new capability immediately.
The score report will have a three-digit credit score, as well as at least four codes on why the score was what it was. In instances where the FACT Act requires it, Mr. Dillon said, a fifth code will be reported. If a score is not found, the report will contain the reasons for that and it could contain various warnings about the information that has been found.
Fair Isaac moved its headquarters to Minneapolis but maintains a significant presence in San Rafael, Calif.
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