CredoLab claims alternative data can improve credit scoring
True innovators look for new data points to predict delinquency, as traditional credit raters load more transaction history into their scoring models.
This summer, Fair Isaac Corporation, the Silicon Valley-based data science and predictive analytics company, will launch the latest version of its famous credit score, FICO Score 10.
The FICO score, which is used in 90% of all consumer credit decisions in the US and by all the large credit card and auto loan companies, will in future include trended credit bureau data, rather than just an assessment of individuals’ income, indebtedness and previous credit event history at a given moment in time.
FICO Score 10 will consider an historical view of data such as account balances for the previous 24 months and payment patterns looking across credit cards, mortgages, auto loans and personal loans, giving lenders more insight into how individuals are managing their credit.
The company claims that by adopting FICO Score 10, a lender could reduce the number of defaults in their portfolio by as much as 10% among newly originated bank cards and 9% among newly originated auto loans, compared with using FICO Score 9.
Ethan Dornhelm, vice-president of FICO scores and predictive analytics, adds: “Beyond our regular releases of new flagship FICO Score models, we continue to develop new, innovative models using alternative data to help consumers who fall outside the traditional credit reporting process and have difficulty getting access to credit.”