JUNE 2004

Fair Isaac Scoring Product to Combat ID Theft

New applications for credit these days present creditors with a new assessment challenge: are the applicants really who they say they are? To help prevent ID theft (i.e., fraud committed when someone opens credit accounts using someone else's personal information), Fair Isaac Corp. is developing a scoring system that pools the application experience of corporate subscribers in order to screen new applications against a database of prior applications. The concept of the pooled application system intends to capitalize on the fact that identity thieves typically do not stop after opening a single new account. Ted Crooks, VP of product management at Fair Isaac told the American Banker, "Banks tend to be siloed, in that they don't share information with each other on a real-time basis." Crooks who apply for loans under someone else's identity "don't just do it once, and they don't just do it at one institution." A system that compares new account openings across institutions and industries uses the thieves' modus operandi against them.

Crooks said the new system is meant to span industries that do not normally compete with each other. A major telecommunications carrier, a large retailer and a large bank card issuer have already subscribed to the system. According to the American Banker, the system would kick in after an application has been assessed for creditworthiness. The next step in the application evaluation process would entail comparing the application data with information on recent applications and new account openings at other subscribers, as well as data from public record databases. Suspicious patterns of new applications and account openings would signal higher risk of ID theft. Depending upon the perceived level of risk, the system would halt the application process and require a telephone interview with the applicant. Based on the answers to the interview, the system would generate an assessment as to whether the application was fraudulent.

According to Avivah Litan, a credit card industry expert and a VP with consulting firm Gartner Inc., identity theft has become one of the fastest growing types of fraud, hitting roughly 7 million consumers annually. Ted Crooks expects that perhaps one out of every 15 – 20 applications to the Fair Isaac system would trigger the interview to validate the applicants identity.