FICO Score, the widely used measure of consumer credit risk, will launch a new, updated version this summer that spans across various credit lines, from home mortgages to auto loans and credit cards.
The new FICO Score 9 will provide predictive power across major credit product lines—mortgages, auto loans, credit cards and personal loans—from originations through account management.
The updated version addresses lenders’ concerns regarding score consistency across the three major credit bureaus, as well as compatibility with previous FICO Score versions to ease adoption, FICO stated in a release.
“Our innovative, multi-faceted modeling approach incorporates a more exhaustive characteristic selection process to build a score that is even more effective across a wide variety of situations,” said Andre Jennings, chief analytic officer for FICO, in a statement.
This approach also uses FICO MOdel Builder’s Multiple Goal Scorecard technology, a tool that balances different scoring objectives applied across various product lines, Jennings added.
Major changes in the lending environment over the last few years have also played a role in FICO taking a different approach to developing the updated score, said Executive Vice President of Scores at FICO James Wehmann in a statement.
“We devised an innovative approach to developing FICO Score 9 that enabled us to leapfrog our own industry-standard benchmark,” Wehmann said. “Our goal is to continue to support a financial ecosystem that includes lenders, securitization investors, rating agencies, regulators and other stakeholders who need a common risk benchmark.”
The most widely used credit score in North America, 90% of all U.S. consumer lending decisions use the FICO Score. Additionally, lenders purchased more than 10 billion FICO Scores in 2013, according to data from the company.
“Lenders today are actively looking to extend credit to new customers in ways that are prudent and comply with their latest regulatory and compliance standards,” Wehmann said. “Additional scores in the FICO 9 Score suite will help them accomplish these objectives.”
Written by Jason Oliva