SAN JOSE, Calif., June 29, 2020 /PRNewswire/ -- FICO, a global
analytics leader, today introduced the FICO® Resilience
Index, an analytic tool that complements the FICO® Score
and helps lenders, borrowers, and investors make more informed and
precise decisions in assessing risk during rapidly changing
economic cycles.
FICO research of more than 70 million consumer credit files from
the Great Recession found that most consumers, including those with
lower FICO Scores, paid their credit obligations and responsibly
managed their financial affairs even under the challenging economic
conditions of double-digit unemployment and low consumer
confidence. While losses across all FICO Score ranges did
approximately double (or worse) during the Great Recession, these
incremental losses from the downturn were disproportionately
concentrated in a small subset of consumers across all FICO Score
ranges. With the FICO® Resilience Index, FICO can,
for the first time, identify those consumers better positioned to
weather an economic downturn and demonstrate that millions of those
resilient consumers can be found in lower FICO ranges that could
otherwise have their credit access cut off, curtailed or priced
higher during an economic downturn.
Designed to complement the industry standard FICO®
Score, the FICO® Resilience Index empowers lenders to
consider the resiliency of a consumer when making credit decisions.
This benefits lenders, consumers and the entire credit market by
enabling more credit to continue to flow during an economic crisis.
This new tool is designed to provide a better understanding and
management of latent risk that is not evident in a strong economy
but emerges when there is an economic downturn.
"Lenders and investors need to be able to evaluate and manage
portfolios based on rapidly changing conditions, to further safety
and soundness in credit as well as support the global economy,"
said Sally Taylor, vice president
and general manager, FICO Scores. "Consumers benefit when
lenders have the tools to identify resilient borrowers, enabling
lenders to price their products more competitively and to
responsibly provide greater access to credit than they would
otherwise be able to do."
Lenders often respond to economic uncertainty by raising credit
score cut-offs. The FICO® Resilience
Index allows lenders to identify those millions of borrowers
that are resilient to economic stress and should not be subject to
more stringent criteria. In addition to providing improved insight
into individual borrowers' financial resilience, the FICO
Resilience Index also allows lenders to better predict how
resulting loan portfolios will perform in changing economic cycles,
facilitating improved capital coverage and more precisely tailored
capital and securitization enhancement requirements.
"This innovation addresses an issue witnessed in the previous
financial crisis, in that financial institutions have been limited
in their ability to calculate how resilient individual consumers
are in the presence of an economic downturn," said Tom Parrent, principal, Quantilytic.
"Through more precise credit analytics, lenders concerned about
increased economic stress can maintain lending to more consumers,
while still protecting their portfolio. Broader lending to more
resilient borrowers may even soften the impact of a downturn should
it occur."
Building on FICO's legacy of innovation for over 30 years, the
FICO® Resilience Index is the latest solution to assist
lenders with the precise assessment of consumer credit risk. The
tool is now available to lenders from multiple credit bureaus.
For more information on the FICO® Resilience Index,
please visit the FICO blog.
Lenders who would like more information please
contact ficoscoreinfo@fico.com.
About FICO
FICO (NYSE: FICO) powers decisions
that help people and businesses around the world prosper. Founded
in 1956 and based in Silicon Valley, the company is a pioneer in
the use of predictive analytics and data science to improve
operational decisions. FICO holds more than 195 US and foreign
patents on technologies that increase profitability, customer
satisfaction and growth for businesses in financial services,
telecommunications, health care, retail and many other industries.
Using FICO solutions, businesses in more than 100 countries do
everything from protecting 2.6 billion payment cards from fraud, to
helping people get credit, to ensuring that millions of airplanes
and rental cars are in the right place at the right
time. Learn more at http://www.fico.com.
Join the conversation
at https://twitter.com/fico & http://www.fico.com/en/blogs/.
For FICO news and media resources,
visit www.fico.com/news.
FICO is a registered trademark of Fair Isaac Corporation
in the United States and in other countries.
View original content to download
multimedia:http://www.prnewswire.com/news-releases/fico-works-to-keep-credit-flowing-during-uncertain-economic-times-301084716.html
SOURCE Fair Isaac Corporation