Transcript Title of Presentation

The FICO® Score
25 Years of Democratizing Access to Credit
Brian Cooper
VP, Scores & Analytics
FICO
© 2014 Fair Isaac Corporation. Confidential.
This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation’s express consent.
FICO® Scores…safe, sound,
innovative, global and consumer friendly
for the next 25 years!
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© 2014 Fair Isaac Corporation. Confidential.
Agenda
►Our
25 Year Journey to Date
►Latest
►What
Developments
This Means for Lenders
►A Consumer
►The
3
Perspective
Journey Forward
© 2014 Fair Isaac Corporation. Confidential.
FICO® Score Evolution
2009
FICO® Score 8
2004
Global FICO®
Score
2014
2013
2014
FICO® Score 9
2009
2004
1997
1995
1993
1991
1989
© 2014 Fair Isaac Corporation. Confidential.
2007
100 billionth
FICO® Score sold
1997
FICO® Score in
South Africa
1995
Fannie Mae and Freddie
Mac endorse the use of
FICO® Scores
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2001
2001
myFICO® service
1993
Specialized
FICO® Scores
1991
FICO® Score at all
three major U.S.
CRAs
2010
FICO®
Economic
Impact Index
2007
1989
FICO® Score is
invented
2013
FICO® Score
Open Access
FICO® Score Solution Set
Open Access
►
Critical in billions of decisions
each year
►
90 of top 100 largest US
financial institutions use
FICO® Scores
►
Lenders can share billions
of FICO® Scores they use
with customers
►
Strengthen customer
relationships by adding value
►
Deployed in 20+ countries
and counting
►
Increase profitability and
growth
►
Used by rating agencies
and secondary market
►
32million consumers and
growing
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© 2014 Fair Isaac Corporation. Confidential.
►
Consumer Access to their
FICO® Score
►
Only single source for identity,
credit, and FICO® Score
monitoring
►
Only myFICO® Service can
provide FICO® Scores based on
data from each of the 3 US CRAs
FICO® Score 9
The most current and predictive FICO® Score
► New
innovations
► More
refined assessment of collection information
► More accurate treatment of thin files
► Designed
to ease adoption:
► Same
score range
► No new reason codes
► Moderate score movement
► Enhanced support for regulatory compliance/model governance
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© 2014 Fair Isaac Corporation. Confidential.
The Changing Credit Landscape
► FICO®
Score 8, released in 2008, was developed during calmer economic conditions
► FICO®
Score 9 reflects better the new economic conditions
FICO® Score 9
FICO® Score 8
Development Sample Composition of Bads
2011–2013
Development Sample Composition of Bads
2006–2008
8.2%
11.9%
Existing
New
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© 2014 Fair Isaac Corporation. Confidential.
Existing
New
The Most Current and Predictive FICO® Score
FICO® Score 9
► Be
Current:
► Grow
with more accurate scores based on today’s
consumer credit behavior
► Be
Compliant:
► The
most current, fully documented FICO® Score
ever
► Be Adaptive:
► Backward
compatibility eases adoption and impact
to operations
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© 2014 Fair Isaac Corporation. Confidential.
Market Drivers for FICO® Scores
Consistent decisions across
portfolios, regions, countries
Availability of credit data
expanding around the world
Evolving regulatory themes
globally
The ability to align scores
across countries
Meaningful, comparable risk
assessment across countries
Models that work in any
market with bureau data
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© 2014 Fair Isaac Corporation. Confidential.
A Global Perspective
DENMARK
NORTH
KOREA
IRAQ
IRAN
VIETNAM
CUBA
LAOS
CAMBODIA
SRI
LANKA
GUYANA
SURINAME
FICO® Score Deployment Legend
FICO® Score Deployed
FICO® Score at Credit Bureau
FICO® Score Capable
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© 2014 Fair Isaac Corporation. Confidential.
FRENCH
GUIANA
FICO® Scores Serve Many Purposes
Multi-functional 3-digit Numbers
►Decision
Key
►Portfolio
Measure
►Benchmark
►Common
Currency
►Consumer
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© 2014 Fair Isaac Corporation. Confidential.
Engagement
Industry Pressures to Increase Consumer Education and
Transparency Provide Opportunity
Regulatory focus on consumer business practices
Appeals for increased consumer education
Proposals for “free score” legislation and regulation
Help detect, mitigate ID Theft and data breach harm
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© 2014 Fair Isaac Corporation. Confidential.
FICO® Score Open Access—A Valuable Program that…
► Lenders
make available for FREE to customers
the actual FICO® Score purchased to
make customer decisions
► Provides
► Helps
address issues in an industry facing
regulatory and other pressures
► Helps
drive increased online engagement, share
of wallet, loyalty and customer satisfaction
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© 2014 Fair Isaac Corporation. Confidential.
How Credit Education Increases Customer Lifetime Value
Providing customers with free access to
FICO® Scores and credit education can deepen
customer relationships and even motivate some
customers to adopt behaviors that would improve
their overall financial health
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© 2014 Fair Isaac Corporation. Confidential.
What Does This Mean for Consumers?
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© 2014 Fair Isaac Corporation. Confidential.
Media and Market Reaction to FICO® Score 9
“Lenders believe the new standards will have a positive impact on the economy…”
Nessa Feddis
Senior Vice President, Consumer Protection at the American Bankers Association
“Credit Scores Could Rise With FICO’s New Model”
The New York Times
“Medical debt will carry less weight in FICO's new credit-score model”
The Washington Post
“…we welcome steps by industry to adjust how it weighs medical debt…”
Moira Vahey
CFPB Spokeswoman
“Changes Could Lead to More Bank Lending, Easier Credit for Some Consumers”
The Wall Street Journal
“This move will ultimately make a real difference in the lives of millions of Americans…”
Steve Brown
President, National Association of Realtors
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© 2014 Fair Isaac Corporation. Confidential.
What Does The Future Hold?
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© 2014 Fair Isaac Corporation. Confidential.
Social Media—Lots of Questions
As a lender, would you As a consumer, would
be happy to use
you be happy to have
Social media data in a your social media data
risk model?
used in risk models?
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© 2014 Fair Isaac Corporation. Confidential.
As a consumer would
you be happy to be
denied credit on the
basis of your social
media data?
What Data Should We Use?

Regulatory compliant

Depth and detail

Broad scope of coverage

Accurate and reliable

Predictive

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© 2014 Fair Isaac Corporation. Confidential.
Orthogonal
Expanding the Scoreable Population
FICO® Score Minimum
Scoring Criteria
• The credit file needs one trade
line reported by a creditor within
the last six months.
• The credit file needs one trade
line that is at least six months old
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© 2014 Fair Isaac Corporation. Confidential.
Alternative Credit Data Score
► Developed
using FICO’s proprietary modeling platform and segmented scoring
technology
► Pilot
scores designed as “second chance” model to address unscoreable
applicants
► Same
look and feel as the FICO® Score
► Attention
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to regulatory compliance using palatable predictive data
© 2014 Fair Isaac Corporation. Confidential.
FICO® Score Core Principles
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© 2014 Fair Isaac Corporation. Confidential.
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Thank You!
Brian Cooper
[email protected]
© 2014 Fair Isaac Corporation. Confidential.
This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation’s express consent.
Learn More at FICO World
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►Leveraging Alternative Credit Data to Make Better Risk Decisions
►How Credit Education Increases Customer Lifetime Value
►Fact vs Fiction: Demystifying Credit Score Features
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►Unveiling FICO® Score 9—Your Credit Score for the New Normal
►FICO® Score Open Access
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►Darlene Goins
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White Papers Online
►To Score or Not to Score?
►Curing Credit Score Confusion—Tens of Millions at a Time for Free
Blogs
►www.fico.com/blog
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© 2014 Fair Isaac Corporation. Confidential.
Please rate this session online!
Brian Cooper
[email protected]
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© 2014 Fair Isaac Corporation. Confidential.