Fair Isaac, PRBC and NCRA partner to enhance credit risk tools for mortgage lenders – NMP Skip to main content

Fair Isaac, PRBC and NCRA partner to enhance credit risk tools for mortgage lenders

National Mortgage Professional
Mar 24, 2014

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].

Published
Mar 24, 2014