The Origin and Evolution of the FICO Score Anthony Sprauve, FICO

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What is the FICO® Score?

• It’s a summary of a consumer’s credit file.

• A single 3-digit number ranging from 300-850 which rank orders consumers according to risk.

• Higher scores equate to lower future risk of default.

FICO® Scores – Expertise

•  Over 100 billion FICO® Scores have been sold to date

•  Powers 10 billion+ lending decisions a year

•  70,000+ businesses rely on FICO® Scores worldwide

•  FICO® Scores enhance decision-making – Across lenders of all credit industries

– Across various decision points -- approval/denial, marketing and portfolio management

FICO® Score Models in Place at All Major U.S. and Canada Credit Reporting Agencies

The Relationship “Connection”

Consumers Credit Grantors

FICO ® Score Distribution

Who Doesn’t Have a FICO ® Score?

•  200 million adults in the United States have a FICO ® Score

•  To generate a FICO ® Score three things must be present (minimum scoring criteria): – Not deceased

– One account must have been opened for at least six months

– One undisputed account must have been updated by the credit bureau within the last six months

•  Data not currently found in credit bureau reports is being studied to determine if it is predictive of a consumer’s likelihood to repay a debt – Property records

– Utility bill payment information

FICO ® Score vs. educational credit scores

•  FICO ® Score used in 90 percent of lending decisions in the United States

•  Educational scores sold to consumers are not used in making lending decisions

•  myFICO.com was created to educate people about the differences between the FICO ® Score and educational scores

•  myFICO.com is the only place consumers can purchase their FICO ® Score

What Makes a Good Credit Score?

•  Provide equal opportunity by scoring at least 200 million Americans

•  Ensure fairness by complying with all appropriate government regulations

•  Empower consumers by utilizing only data they can review, challenge and correct

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What Makes a Good Credit Score?

•  Protect the safety and soundness of lending decisions by using a scientifically valid, peer-reviewed scoring system

•  Promote transparency via public resources that explain how the score is computed along with guidance for improving a score

•  Create financial opportunity for everyone with an algorithm that is not affected by a consumer's educational or employment background

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