OCTOBER 2004

Global Risk Measure

While lenders in the U.S., Canada, U.K., and South Africa can use Fair Isaac's FICO credit risk score in their credit granting decisions, the lack of credit bureau scores in other countries hampers the ability of businesses to control for risk in their lending decisions. To address this problem, last April, Fair Isaac introduced the Global FICO score. Ron Totaro, vice president of Global Scoring Solutions at Fair Isaac described the new product as "...a solution both for lenders in countries where FICO scores are not yet available, and for multinational lenders who are seeking a common risk measure across diverse markets."

The product can overcome "[w]ide variances in the depth, breadth and consistency of credit bureau data..." across countries "...by building into its Global FICO scoring formula a flexible but comprehensive library of variables to extract predictive value from the widest range of available credit data." No matter how comprehensive the level of data, "[t]he Global FICO score is a suite of predictive models [that is] designed to rank-order the risk of lenders' applicants or existing customers in any market that has bureau data..." A new model is assigned to each level of data as the information about customers provided to bureaus increases from negative-only performance to "...greater degrees of positive data."

The models already have generated scores for companies in Mexico, Poland, and Sweden. Late last month, Fair Isaac announced the worldwide availability of the Global FICO score. Scores for customers in the U.S. will continue to be generated using traditional FICO credit scoring technology. In the future, however, scores for U.S. consumers will be rescaled from the current values of 350 to 850 to the 150 to 950 range that is used for newer scoring products including the Global FICO score.