Big changes are coming to credit reports. FICO, the company behind the most-widely used consumer credit scores, announced earlier this month it is creating a new scoring system that aims to make millions of Americans creditworthy.
“Our goal is to extend credit to as many people as we can responsibly,” FICO CEO William Lansing told FBN’s Liz Claman in an exclusive interview.
According to FICO, about 53 million Americans do not have credit scores. In order to help lower that number, the company’s new scoring system will use alternative data from Equifax Inc. and LexisNexis, including the payment history of borrowers’ cable, cellphone and utility bills. Historically, FICO scores have been built on a customer’s repayment of debt, mainly credit card payment data.
“When you get into some populations… there’s not enough data to compute a FICO score,” said Lansing. “We’ve developed an alternative model that looks at other, alternative data to evaluate a borrower’s creditworthiness.”
So far, FICO says the early results of a recently completed pilot program with 10 of the leading lenders in the country are “very positive.” Scores in the new system will range from 300 to 850. However, the company says it is not looking to change the standards for lenders.
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“The goal is to identify would-be borrowers who meet our standards, but they meet it by meeting the standards with different data than we’ve traditionally used,” said Lansing. “I don’t expect that we’ll have lenders lowering their standards to do this, it’s just looking at data they’ve never looked at before.”