But will the industry be convinced to make the switch?
FICO is launching a new version of its credit score this summer with an enticing benefit for lenders.
The credit analytics firm says that its FICO Score 10 Suite has enhanced predictive power and the most comprehensive data available that means a lender could cut defaults by as much as 10% for newly originated bankcards and auto loans compared to using FICO 9, although many lenders use older versions.
Because the FICO 5 version of the score most widely used in the mortgage industry is older still, FICO says its new release could reduce defaults by 17% by comparison.
The firm says that the new version will be easier to adopt due to its backward compatibility with older versions due to its use of reason codes and consistent score ranges.
“Clients value the dependability and industry-leading predictive power of the FICO Score,” said Jim Wehmann, executive vice president for Scores at FICO. “FICO is a cornerstone for consumer lending decisions. We continuously innovate using the latest, most robust data, while maintaining consistency with previous models to ensure backward compatibility and minimize operational changes required to adopt a new score.”
To further enhance predictive power, FICO Score 10 T incorporates trended credit bureau data which, unlike using traditional credit bureau data, considers a historical view of data such as account balances for the previous 24+ months, giving lenders more insight into how individuals are managing their credit.
“Many lenders want to leverage the most comprehensive data possible to make precise lending decisions,” Wehmann added. “By offering a score that taps further into trended data, we’re able to give lenders greater flexibility and predictive power, as well as ease of integration.”