Fair Isaac and TransUnion Enhance FICO Risk Score in Canada

TransUnion and Fair Isaac Corporation announced the availability to Canadian lenders of the newest FICO(R) Risk Score (formerly known as Empirica) for precise management of consumer credit risk. The FICO Risk Score analyzes TransUnion credit reports to rank-order consumers according to the likelihood that their credit obligations will be paid as expected.

In this redevelopment of its FICO scoring model for Canada, Fair Isaac analyzed annonimized consumer credit information from TransUnion to significantly enhance the model’s ability to identify high-risk consumers, particularly among new-account populations and among people who have a history of serious credit problems.

"Our newest FICO scoring model at TransUnion is significantly more powerful due to the analysis of a greater amount of information, resulting in the ability to better differentiate the credit performance of Canadian consumers," said Ron Totaro, vice president of Global Scoring at Fair Isaac. "By studying large anonymous samples of TransUnion’s credit history data, we found that consumers are opening more credit lines, carrying higher balances, and generally using credit to a greater degree than ever before. This increased usage has produced thicker, deeper credit histories which in turn produced more precise patterns that have helped us pinpoint credit risk characteristics and behaviors for the general population."

"Lenders and other businesses have a greater need today to maximize and leverage massive amounts of data for risk management," said TransUnion’s Derrick Breau, vice president of sales and marketing. "The FICO Risk Score and TransUnion credit reports offer lenders valuable insight into the credit history and future risk of prospects, new applicants and current customers. Using our tools, lenders can better manage or even expand their customer base while managing their risk. In future, we anticipate even better tools based on an expanded consumer database once mortgage data is broadly reported."

The new FICO Risk Score also enhances an important protection for consumers who shop at several lenders to find the best mortgage or auto loan. Previously, the FICO scoring model provided an inquiry filter for consumers who shopped for a loan, treating multiple credit inquiries in any 14-day period as a single search for credit. The new scoring model extends the inquiry filter for this shopping to 45 days. Accordingly, during any 45-day period all mortgage-related or auto loan-related lender inquiries on the consumer’s TransUnion credit report are treated by the redeveloped FICO scoring model as a single mortgage or auto inquiry. Consumers benefit because they can shop for the best loan without worry that multiple lender inquiries will significantly affect their future FICO Risk Scores.

For years, TransUnion has provided the FICO Risk Score to lenders in the Canadian marketplace. This has allowed banks to not only specialize in credit products and make loans outside their customer base, but it has also spurred the growth of new markets and helped regulators ensure fair lending and equal consumer access to capital.