Credit-Scoring Pilot Offers a New Look at 15 Million Consumers (April 6, 2015)
The quest to use alternative data to score thin- or no-file consumers continues with a new program being led by FICO, LexisNexis Risk Solutions and Equifax. The pilot enables 12 of the U.S.’s largest credit issuers to base credit decisions on data, such as property records and payment history for telecommunications and utility bills, which FICO’s data scientists claim can be used to reliably score 15 million consumers who don’t have enough credit data to generate traditional FICO scores. The alternative data is sourced from LexisNexis and Equifax records.
FICO’s Jim Wehmann, executive vice president for scores, said the program is aimed at opening credit products to unbanked and underbanked consumers. “FICO’s focus is on expanding access to credit; not simply scoring more people. Our approach also addresses a paradox for people seeking their first traditional credit product—you often need a credit history before you can get traditional credit,” Wehmann said. The company expects to make the alternative scoring model available to more lenders later this year after the pilot is complete.
Using alternative scoring data, including prepaid card transaction data, has been a sought-after but elusive goal for the prepaid industry for years. Regulatory scrutiny also has made it impractical for most prepaid providers to offer credit themselves, and that may continue depending on the CFPB’s final rule on prepaid accounts.
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