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FICO, LexisNexis Risk Solutions, and Equifax have jointly detailed their plans for a pilot program that is currently underway. The program allows 12 of the largest credit card issuers in the U.S. to use alternative data to identify creditworthy individuals who would otherwise be unlikely to obtain traditional credit. Based on extensive research, FICO’s data scientists found that alternative data such as property records, telecommunications and utility information can reliably be used to score 15 million consumers who do not have enough credit data to generate FICO scores. By using alternative data from LexisNexis and Equifax, FICO will give card issuers a FICO Score that complies with relevant regulations that they can use to extend credit responsibly to millions of additional people.
“Working with Equifax and LexisNexis, we set out to help unbanked, under-banked and disadvantaged people gain equal access to the standard credit products enjoyed by millions of Americans,” said Jim Wehmann, FICO’s executive vice president for Scores. “We’re excited by our pilot program’s strong results thus far. FICO’s focus is on expanding access to credit; not simply scoring more people. Our approach also addresses a paradox for people seeking their first traditional credit product—you often need a credit history before you can get traditional credit.”
The data used in FICO’s pilot program includes telecommunications and utility bills from Equifax as well as property and public records from LexisNexis. This new FICO Score is engineered to work alongside existing FICO Scores. Card issuers will be able to use the alternative score without having to “rip and replace” existing systems, significantly lowering the cost and accelerating time to market.
“Card issuers are seeking opportunities to safely expand access to credit based on new data sources that are reliable, compliant and predictive and we have received an incredible response to this pilot program,” said Rick Trainor, CEO of LexisNexis Risk Solutions, Business Services. “LexisNexis data, which the financial services industry has trusted for more than 40 years, provides additional insights about creditworthiness that can help bring millions of consumers into the financial mainstream.”
FICO is planning to complete the pilot program in the coming months, and expects to make the score based on alternative credit data available to more lenders later this year.