Fair Isaac, PRBC and NCRA partner to enhance credit risk tools for mortgage lendersTerry W. ClemansFair Isaac, PRBC, NCRA, credit, FICO Expansion Score, Michael Nathans, Tom Quinn
"PRBC's alliance with Fair Isaac is an important step
towards freeing mortgage lenders from the expensive and
time-consuming, manual underwriting procedures they encounter when
they try to lend to people who have little or no documented credit
experience."
--Michael Nathans, founder of Payment Reporting Builds Credit
(PRBC)
Fair Isaac Corporation, a provider of analytics and decision
management technology, and Payment Reporting Builds Credit (PRBC),
a credit information repository that collects, verifies and scores
rental and bill payment data distributed to the mortgage industry
by members of the National Credit Reporting Association (NCRA),
have announced a new collaboration. They will deliver PRBC Credit
Reports with FICO Expansion Score, a credit risk management tool
that U.S. mortgage lenders can use when assessing the risk of
applicants of those who have little or no traditional credit
history.
The PRBC Credit Report with FICO Expansion Score combines Fair
Isaac's FICO Expansion Score with the underlying, comprehensive
credit report which includes rental and bill payment data from
PRBC's repository, non-traditional credit history data verified
from third-party sources and traditional tri-merge credit bureau
data when available.
The FICO Expansion Score will incorporate all these data
elements when calculating the credit risk of individuals who have
minimal or no credit history on file. The FICO Expansion score will
use non-traditional credit data to create a score that aligns with
the FICO credit score used today by most mortgage lenders, using
the same 300 to 850 score range.
"PRBC's alliance with Fair Isaac is an important step towards
freeing mortgage lenders from the expensive and time-consuming,
manual underwriting procedures they encounter when they try to lend
to people who have little or no documented credit experience," said
Michael Nathans, founder of the PRBC. "By adding PRBC's verified
rent and bill payment data to Fair Isaac's FICO Expansion Score and
associated credit report, we are creating a new standard for
assessing the credit risk of thin-file mortgage applicants."
"Lenders will be able to easily access this new package through
their existing connections to NCRA credit reporting agencies," said
Tom Quinn, vice president of global scoring for Fair Isaac. "In
addition to helping lenders to eventually automate a manual
underwriting process, this package also can help them to expand
their markets, reduce losses and make more financial services
available to more people."
Mortgage credit reporting agencies in the NCRA will sell the new
risk-assessment package to mortgage lenders and brokers, and
provide the verifications of all third party non-traditional credit
data sources. NCRA, working with PRBC and information provided from
the lending community, have created a new Non-Traditional Credit
Standards Committee within its association to create a set of
standards for the verification of this data to greatly reduce the
potential for fraud in these data sets. Lenders using this new
FICO/PRBC expansion score can rest assured that the data quality in
this report will be based on factual payment history.
The members of NCRA are excited to have the opportunity to be
part of this revolutionary mortgage credit risk assessment product.
The alliance between Fair Isaac and PRBC, combined with data from
our membership that has been verified to higher standards than the
industry has been accustomed to, will help lenders originate
sustainable mortgage loans for an historically overlooked and
underserved segment of home buyers.
The bill payment and rental histories tracked by PRBC are not
found at the national credit reporting agencies, nor are the other
non-traditional sources of consumer data tapped by the FICO
Expansion Score. Until now, a consumer making payments on a car
loan or any other type of credit account to a creditor with only a
couple hundred active consumer loans would not have a chance for
that account to impact their FICO score. The minimum account
thresholds set by the national credit repositories prohibit
creditors and smaller lenders from reporting their loans to the
system strictly for not meeting the minimum reporting requirements.
Does the number of the active accounts the lender services make the
consumers payment history any less predictive about future loan
performance? NCRA believes it does not, and this program is
designed to verify the actual payment history from those smaller
creditors and allow FICO to score it just as they would data from
any other lender.
The PRBC Credit Report with FICO Expansion Score will provide
lenders with their best tool for assessing the credit risk of
nearly 50 million adults who have little or no credit history on
file, including recent immigrants and young adults. Businesses can
use the PRBC Credit Report with FICO Expansion Score to make more
financial services available to more people who have missed out on
opportunities simply because they lack a traditional credit
>history.
Terry W. Clemans is the executive director of the National Credit Reporting Association
Inc.(NCRA). He may be reached at (630) 539-1525 or e-mail
[email protected].
