Re: Experian roles out new credit score
06-18-2012 04:44 PM
We aren't the customers for Experian.
It's going to be tested in subprime lenders, it wouldn't surprise me if one I used to work at is in the list (since they are firmly between PDL's and traditional unsecured loans) and pull EX exclusively. It's not hard to test, but it takes time. It's one extra generated score, one extra entry in a customer's database record, and one extra thing to check on the OLAP query later.
If the score provides better resolution than either FICO (which admittedly sort of sucks for under-banked people for all the known reasons) or their internal models, it'll get adopted. If it reduces first-payment defaults in the deep subprime space, it'll absolutely be used.; however, it won't replace traditional FICO scores everywhere else. This is sort of like the FHA / GSE's with that funky score for housing approval if you don't have a real FICO... but if you do, they'll use it without regards to anything else.
Most of the industry and the CRA's are going to something like this, TU announced something similar earlier this year. I'd be willing to bet Equifax likewise makes an announcement by the end fo the year at the latest. Alternatively FICO themselves may try to come up with something, it may already be in their NextGen score for all I know.
FWIW -- It doesn't have to reduce defaults, it just has to help them improve pricing to reduce their overall loses. For example, help creditors put higher risk customers into more expensive products.