Industry News

New scores gauge risk of borrowers with little or no credit

Fair Isaac says studies validate FICO Expansion scores

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Fair Isaac Credit Services Inc. says a recent study of its FICO Expansion scores -- which are used to qualify borrowers who have little or no information on file with credit bureaus -- demonstrates they are a reliable tool for predicting risk, and match up closely with the company's traditional scores. Fair Isaac created the FICO Expansion score in 2004, to augment what is now known as the "Classic FICO" score. The FICO Expansion score is intended to help lenders gauge the risk of about 20 percent of the population with thin or no credit bureau files. That population includes recent immigrants and young adults who make up a significant proportion of the first-time home-buyer market. Fair Isaac says its study of the performance of FICO Expansion scores -- conducted with the cooperation of more than a dozen of the largest lenders in the mortgage auto finance and credit card industries -- proves they are a reliable measure of risk that calibrate well with the Classic FICO. In the stu...