Equifax Inc. and FICO have launched the FICO Economic Impact Index, a new analytic solution that provides lenders with insights for portfolio stress testing, enabling them to adjust their risk management policies and decision strategies.
Developed by FICO and initially available on an exclusive basis from Equifax, the FICO Economic Impact Index helps lenders understand how future economic fluctuations can affect BEACON 09 (FICO 8) credit scores. Leveraging Equifax's data assets, the solution is designed to help lenders assess the potential impact of various economic scenarios on the repayment risk levels related to FICO 8 scores.
The patent-pending solution indicates the projected positive/negative level of impact on a specific FICO score range based on selected economic forecasts, Equifax and FICO say. With this information, lenders can make informed decisions about modifying score cutoffs for account opening and portfolio management decisions.
‘High unemployment rates and rising account delinquencies underscore the need for greater transparency into consumers' financial profiles,’ says Dann Adams, president of consumer information solutions at Equifax.
Lenders that adopt FICO Economic Impact Index gain access to economic intelligence based on dozens of key economic indicators, including unemployment, gross domestic product, interest rates, housing prices and foreclosures. With economic forecasts updated quarterly, the index provides lenders with an analytically objective basis for adjusting their underwriting policies, account treatment, reserve levels and capital requirements, the companies add.