Fair Isaac Corporation, a provider of analytics and decision management technology, announced on Thursday that TransUnion is the first credit reporting company to offer Fair Isaac's newest FICO score to businesses. TransUnion will market scores from the new model under the product name FICO Risk Score, Classic 08.
Risk scores from Fair Isaac's newest redevelopment of its FICO scoring model are expected to provide up to twice the improvement in predictive power compared with previous revisions to the model. This improvement will increase the ability of clients to reduce losses within current portfolios and to acquire more profitable prospects.
Clients may achieve improvements in risk prediction over current FICO scores among key consumer segments, such as those opening new accounts or having prior derogatory information. In addition, this newest generation of FICO scores includes refinements to help lenders better address consumers who are comparatively new to credit.
"The FICO 08 score represents Fair Isaac's best analytic work ever on our classic FICO credit risk model," said Lisa Nelson, vice president of Global Scoring Solutions for Fair Isaac. "We encourage TransUnion's customers to adopt the new score and take full advantage of its increased predictive power. We designed it to make their conversion to FICO 08 easier, with no major operational adjustments required."
To assist clients' conversion, the new FICO score retains the same 300-850 scoring range, score reason codes, minimum scoring criteria, and inquiry treatment as previous versions of the score.
In addition, FICO Risk Score, Classic 08 helps lenders protect against authorized user-account 'piggybacking' by incorporating new patent-pending technology that materially reduces the potential score impact associated with the abuse of authorized user accounts. By continuing to include authorized user accounts in score calculations, the FICO 08 score continues to support lenders' efforts to comply with federal regulations.
"Lenders striving to increase lending while mitigating risk need improved scoring tools that better assess the disparate risk profiles of different customer segments," said Craig Focardi, research area director for TowerGroup. "Scoring tools also need to help protect against fraud in new credit applications, which remains a big concern for lenders-while still complying with regulations that permit 'Authorized Users' to establish credit via an existing third-party account. Lenders, guarantors, loan investors and other parties need new analytics to reinvent credit risk assessment and restore the US consumer lending and loan securitization markets."
Fair Isaac also has developed two industry-specific versions of FICO Risk Score, Classic 08 for TransUnion clients who offer consumer auto financing and bankcards. TransUnion expects to make these new industry option FICO scores available to lenders starting in April.