Information provider CoreLogic and FICO have together launched a consumer credit risk score that is expected to improve the quality of lending decisions and increase the number of mortgage loans lenders make.
The new initiative, called FICO® Mortgage Score Powered by CoreLogic®, evaluates the traditional credit data from the national credit data repositories.
Additionally, the supplemental consumer credit data in the CoreLogic CoreScore™ credit report, which was launched in October 2011, will deliver a more comprehensive and accurate view of a consumer’s credit risk profile for lenders to prequalify and originate loans.
The new scoring model, which was designed to specifically predict mortgage loan performance, has shown a considerable improvement in risk prediction. This new scoring model developed by FICO only uses data available on the CoreLogic CoreScore credit report. This is expected to help mortgage lenders more safely and profitably expand their origination volumes and help strengthen and grow the overall mortgage lending market.
FICO issued a quarterly survey of bank risk professionals that was conducted by the Professional Risk Managers’ International Association. The survey showed that bankers still lack confidence in the housing finance. Of bankers surveyed, roughly 75% of respondents expect the level of mortgage delinquencies to rise or stay the same in the six-month period after the survey, and over 85% hold the same view for home equity line delinquencies.
“In this complicated operating environment, lenders are increasingly turning to new data sources to help better interpret a consumer’s credit risk, so that more loans can be approved while mitigating potential losses,” said Tim Grace, senior vice president of product management at CoreLogic.
Grace described the new offering as a new composite, multi-bureau credit score generated from both traditional credit data and CoreLogic supplemental data. He said that it expands the applicant credit spectrum by including property transaction data, landlord/tenant data, borrower-specific public data, and other alternative credit data.
"For a top-20 lender processing 300,000 applications a year, adopting this new score could translate into 3,900 more loans approved every year along with a net financial benefit of $14.5 million," Grace said. "As such, it not only provides a more complete and predictive evaluation of a consumer’s credit risk profile, but it can empower lenders to better mitigate risk and approve more loans for more consumers.”
The new FICO Mortgage Score is meant especially for prequalification and origination and delivers increased insight when it matters most, said Joanne Gaskin, senior director of Scores product management and mortgage practice leader at FICO.
“For many lenders, the increased predictive lift will translate into thousands of new mortgages, and the avoidance of millions of dollars in bad loans and associated costs. This innovation is a win-win for lenders and consumers alike,” Gaskin said.