Validation results from major UK lenders’ portfolios show strong performance on credit cards, personal loan and current accounts www.efxfico.com
LONDON —January 8, 2014 — Global information solutions leader Equifax and analytics software leader FICO today announced that tests of their new score for measuring credit capacity show its strength at identifying new groups of consumers who can handle more credit, which could be fundamental in helping UK lenders improve profitable lending growth. The FICO® Credit Capacity Index™, built on Equifax’s market-leading risk score, Risk Navigator 4 (RN4), has been validated on two large credit portfolios in the UK with impressive results.
For these studies, FICO and Equifax applied the FICO Credit Capacity Index (CCI) to approximately 275,000 UK consumer credit applications for credit line increases, current accounts, credit cards and personal loans. The performance of these accounts a year later, as well as the estimated performance for consumers who were declined, showed that CCI used with RN4 strongly rank-ordered borrowers.
For borrowers who applied for a current account or personal loan, the ratio of good payers to those who had credit problems a year later was six times greater for borrowers with high CCI scores than for those with low CCI scores. For credit cards the ratio was 15 times higher for high-scoring applicants than for those with low scores.
“As the UK economy continues to improve, lenders are looking for every opportunity to find new good customers,” said Shawn Holtzclaw, managing director, Equifax UK. “Used with Risk Navigator 4, the FICO Credit Capacity Index provides a strong measure of credit risk and capacity, and can help lenders expand their credit portfolios across products.”
“Being able to identify consumers who have high CCI scores could provide an opportunity for lenders to say ‘yes’ to more applicants while maintaining their current risk levels,” added Keri Kramers-Dove who manages global scores for FICO. “Our tests showed that lenders could approve 5 percent more of the applicant population while maintaining their overall risk level.”
Capitalizing on FICO’s patented analytic technology and Equifax’s rich credit data, bureau characteristics and scores on the UK population, the new solution from the Equifax-FICO alliance helps lenders assess a consumer’s ability to manage additional credit. Issuers can take a more forward-looking view of credit risk, enabling them to grow their customer portfolios without extending credit increases to consumers who will be unable to manage the additional debt.
“Risk management today is focused on stable, profitable growth for the banking industry,” said Hayley Kershaw, managing director of FICO for Europe, the Middle East and Africa. “Through our alliance with Equifax and our continued innovation in predictive analytics, we are helping UK lenders satisfy the growing demand for credit, which in turn fuels this country’s economic recovery and health.”
Information on the FICO Credit Capacity Index and the alliance’s other jointly offered solutions is available at www.efxfico.com.
EQUIFAX is a global leader in consumer, commercial and workforce information solutions, providing businesses of all sizes and consumers with information they can trust. We organize and assimilate data on more than 500 million consumers and 81 million businesses worldwide, and use advanced analytics and proprietary technology to create and deliver customized insights that enrich both the performance of businesses and the lives of consumers.
Headquartered in Atlanta, EQUIFAX operates or has investments in 18 countries and is a member of Standard & Poor’s (S&P) 500® Index. Its common stock is traded on the New York Stock Exchange (NYSE) under the symbol EFX. For more information, please visit www.equifax.com.
FICO (NYSE: FICO) is a leading analytics software company, helping businesses in 80+ countries make better decisions that drive higher levels of growth, profitability and customer satisfaction. The company’s groundbreaking use of Big Data and mathematical algorithms to predict consumer behavior has transformed entire industries. FICO provides analytics software and tools used across multiple industries to manage risk, fight fraud, build more profitable customer relationships, optimize operations and meet strict government regulations. Many of our products reach industry-wide adoption — such as the FICO® Score, the standard measure of consumer credit risk in the United States. FICO solutions leverage open-source standards and cloud computing to maximize flexibility, speed deployment and reduce costs. The company also helps millions of people manage their personal credit health. FICO: Make every decision count™.