Should your credit score give equal weight to where you live and how many phone numbers you have, just like card payment history or the size of your mortgage does? That’s the argument being made by a new credit-scoring firm that has the attention of powerful people in Washington. Here’s how it could all shake out.
Historically, the credit scoring landscape has been fairly immune to change, with Fair Isaacs (Stock Quote: FIC) the single, dominant player in the credit & risk reputation market. FICO is beyond dispute the most widely used credit-scoring model by major U.S. lenders.
The FICO model is long-standing and fairly basic. Key factors have always included the ability to pay your bills on time, how many credit lines you have opened, and what’s left on the balance you owe.
Now, a new credit scoring model is making the rounds in Washington, one that could significantly impact your credit score. The new model, developed by San Diego-based ID Analytics, could augment, but not intentionally replace, the long-standing FICO scoring model. In the ID Analytics offering, which is currently being poked and prodded in test-run mode by some lenders, factors like how many times you’ve moved or how many phone lines you’ve opened could negatively impact your credit score.
The specific tool that ID Analytics is touting is called ID Analytics Credit Optics – tech-speak for a software tool that allows lenders to make credit and risk decisions, as the company’s web site says, “by gleaning insight from information that is not typically included when calculating a traditional credit score. Organizations can immediately reduce losses by combining traditional credit scores with ID Analytics Credit Optics to fine tune credit decision processes."
