CoreLogic and FICO jointly created a new consumer credit risk score that is expected to enable growth in the mortgage lending market.
The FICO Mortgage Score will evaluate traditional credit data as well as supplemental data from CoreLogic’s CoreScore credit report in order to deliver a more accurate depiction of a consumer’s credit risk profile for loan prequalification and origination.
Information that is looked at to determine a consumer’s credit score includes property transaction data, landlord/tenant data, borrower-specific public data and other alternative credit data.
CoreLogic said the new credit score maintains similar features to FICO’s current model such as a consistent score range from 350 to 850, a set of reason codes and odds-to-score relationship, therefore making it easy for lenders to integrate into their business to help them grow mortgage origination volumes.
“In this complicated operating environment, lenders are increasingly turning to new data sources to help better interpret a consumer’s credit risk, so that more loans can be approved while mitigating potential losses,” said Tim Grace, senior vice president of product management at CoreLogic.
Grace added that if a top-20 lender who processes 300,000 applications a year utilizes FICO Mortgage Score, they will be able to originate an extra 3,900 loans a year. He also said this product can help a company gain an additional $14.5 million in net financial benefits.
“As such, it not only provides a more complete and predictive evaluation of a consumer’s credit risk profile, but it can empower lenders to better mitigate risk and approve more loans for more consumers,” Grace said.
According to a FICO quarterly survey of bank risk professionals released in April, bankers continue to lack confidence in the housing finance marketplace. Nearly 75% of the survey respondents expect the level of mortgage delinquencies to increase or stay the same over the six-month period following the survey, while more than 85% have a similar viewpoint regarding home equity line delinquencies.
Joanne Gaskin, senior director of Scores product management and mortgage practice leader at FICO, said the innovation of the FICO Mortgage Score is a win-win for both lenders and consumers.
“The new FICO Mortgage Score is designed especially for prequalification and origination and delivers increased insight when it matters most,” Gaskin said. “For many lenders, the increased predictive lift will translate into thousands of new mortgages, and the avoidance of millions of dollars in bad loans and associated costs.”
