New #CreditModels

Capture

The Fair Isaac Corporation recently introduced a new scoring model. The model could help to expand credit to first-time and minority groups. But there is a problem: Fannie Mae and Freddie Mac, who support the majority of the mortgage market, don’t use the new model.

In “FICO 9″, less emphasis is given to the impact of unpaid medical bills and the effect of missed payments on debts that have subsequently been paid off are eliminated. FICO estimates that the new model could improve scores by 25 basis points for the former group and by as much as 100 points for the latter group. Survey participants were asked if this new scoring model would increase accepted applications at their firm.

Advertisements