A New Factor in Credit Scoring?

ID Analytics is touting the credit scoring tool as a "third way" that provides real-time visibility into the "stability" of an individual (hence the weighting given to frequent movers and people who keep jumping in and out of new phone numbers). Traditional credit scores, the company says, "determine credit risk by predicting the willingness and ability to repay debt." But lenders today aren’t fully satisfied with that model, says the company. It’s a dynamic consumer lending environment that calls for a credit scoring calculus that emphasizes the examination of changes to identity risk and credit risk over a sustained period of time.

So, does it work? ID Analytics claims it does. "When used in combination with traditional credit scores at the point of origination," says the company’s web site, "this incremental perspective of risk has proven to eliminate up to 25% of credit losses without reducing the number of accounts booked."

If that’s true, then adding the "stability and sustainability" factors to the FICO mix may attract plenty of attention on the part of lenders, many of whom are faced with mounting challenges in weighing consumer credit in a frequently toxic and hard-to-predict U.S. economy.

But the company may have some powerful connections in Washington, too. A key executive was once a high-level staffer for Calif. Sen. Dianne Feinstein, a formidable and vocal advocate for consumers on credit and lending issues. Consequently, the ID Analytics tool is getting a full review in Washington, where reform is the order of the day after two years of economic anxiety and recession.

As ID Analytics insist, the Credit Optics tool is only a supplement, and not a replacement, for the traditional "willingness and ability to replace debt." But if the model gets any traction in Washington, and among major lenders, the technology may have the momentum to go from "supplemental" to "industry standard" later on down the road.

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