Fair Isaac Corporation’s best known product, the FICO score, is a teenager who has virtually cornered the market. For eighteen years, the three-digit number has been the preeminent risk predictor used by lenders when deciding whether to grant credit to consumers. To date, over 100 billion FICO scores have been provided to U.S. businesses. If you want to get a credit card, mortgage, auto loan, auto insurance, job, security clearance, apartment, cell phone, or utility service, you may need to have a good credit score.
Today the company also proudly trumpeted the projected rollout this fall of an improved “Classic FICO” scoring product. Fair Isaac claims that the upgraded scores will increase risk predictiveness by 5 – 15 percent. The company also assures lenders that they will not need to make big operational changes to their own scoring systems in order to adopt the new Classic FICO.
FICO Lite or FAKO scores are provided to thousands of consumers who are unaware that they are not receiving the real deal. Some of these products are even sold by the major national credit reporting agencies, adding further confusion in the marketplace.
Why is Fair Isaac making a big fanfare about another upgrade of its popular product? One possibility: it is trying to ensure that lenders do not adopt VantageScore, the uniform scoring product that the big 3 credit reporting agencies (Experian, Equifax, and TransUnion) announced more than a year ago would take over the credit scoring world. However, only Experian is currently selling VantageScores to consumers, so they do not appear to be sweeping our credit-crazed nation. Further, lenders would need to overhaul their operations to switch from FICO to VantageScore, which would cost money and would be, well risky.
Fair Issac’s press release is available here