Scores for Those Without Them

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Fair, Isaac has launched a new FICO score designed specifically for the underserved market-those people who don't have regular credit scores because they have little or no credit history with traditional financial institutions.

"In the past, many [financial institutions] simply turned down a loan application from someone who didn't have a credit score," said Fair, Isaac's Craig Dillon. "But just because someone isn't in one of the national [credit risk assessment programs] doesn't mean they're automatically a credit risk....If you aren't in the traditional lending system, perhaps because you are new to this country, or you are young, for example, it is very hard to break into it. This new score can help."

Fair Isaac estimates that about 160 million people were already covered by the company's traditional FICO scores but that approximately 50 million didn't have enough credit history to generate a score for them. Using alternative consumer data-such as payday loan performance-FI can now provide a credit score for about 25-million of those "unbanked."

During this initial rollout period, FI is only offering the new score for originations, but the company plans to offer the scores for use in pre-screening and financial management programs. Fair, Isaac is also in discussion with the government sponsored entities about using the score for mortgages and other programs, as well.

Industry observers offer both praise and concerns in the Aug. 9 edition of The Credit Union Journal.

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