The company boasts that the new model will have greater predictive powers while reducing risk for lenders.
FICO, a data analytics company most commonly known for its credit scoring model, announced Thursday it’s set to roll out a new model this summer that boasts greater predictive power and could lead to a 17 percent reduction of defaults for mortgage lenders.
The new score, dubbed the FICO Score 10 Suite, could lower the credit score of some Americans while scoring consumers that fall behind on loan payments more harshly and flag others that utilize personal loans, according to the Wall Street Journal, which first reported the changes.
FICO boasts that the improved score could reduce the number of defaults in any lenders portfolio as much as 17 percent for newly originated mortgage loans, 9 percent for newly originated auto loans and 10 percent for newly originated bankcards.
“Clients value the dependability and industry-leading predictive power of the FICO Score,” Jim Wehmann, executive vice president for Scores at FICO, said in a statement. “FICO is a cornerstone for consumer lending decisions. We continuously innovate using the latest, most robust data, while maintaining consistency with previous models to ensure backward compatibility and minimize operational changes required to adopt a new score.”
The new score will also make the switch to trended credit data, which considers a historical view of account balances — like bank balances — over the previous 24 months.
“Many lenders want to leverage the most comprehensive data possible to make precise lending decisions,” Wehmann said. “By offering a score that taps further into trended data, we’re able to give lenders greater flexibility and predictive power, as well as ease of integration.”
The changes come at a time when credit standards had become more lenient in recent years, leading to the average FICO score hitting an all-time high.
Are you ready for what the industry holds in 2020? Inman Connect New York is your key to unlocking opportunity in a changing market. At Connect you will gain insight into the future, discover new strategies and network with real estate’s best and brightest to accelerate your business. Create your 2020 success story at Inman Connect New York, January 28-31, 2020.
Thinking of bringing your team? There are special onsite perks and discounts when you buy tickets together. Contact us to find out more.