A year ago, Fair, Isaac & Co. abruptly reversed its long-held stance that its Fico credit scores should be kept away from consumers, and advocated that the scores be disseminated and explained.
Now the risk management company is taking its openness policy several steps further. It is introducing new consumer products, including guides showing which scores fetch which interest rates and a service alerting consumers when their Fico score has moved up or down enough to put them in a new interest rate bracket.
To sell these products, Fair, Isaac says it needs the top U.S. banks to act as distributors. In exchange, the 46-year-old San Rafael, Calif., company says, banks can take all the kudos for improving their customers scores and can earn a commission fee as high as 25%.
At first it was regulatory pressure that pushed Fair, Isaac to put its Fico scores, which most lenders use to evaluate creditworthiness, at consumers fingertips. In March of last year it and the credit bureau Equifax Inc. started selling an online product called Score Power that featured a combined Fico score/credit report.
Now that that offering has proven so popular, Fair, Isaac has seen that it can make a good business of packaging and selling its credit information to consumers, and it has been motivated to come up with more products.
The products also answer a frequent complaint from people who say they have been victims of predatory lending: that lack of access to their credit scores hampered their ability to obtain good loans.
One of the first financial institutions to sign on to Fair, Isaacs latest program is Citibank. The retail banking unit of Citigroup Inc. has begun displaying links to Fair, Isaacs consumer direct site www.myFICO.com on its mortgage-related Web pages, including www.iown.com and www.citimortgage.com. Ellie Mae and Intuit Inc. also have links to the Fair, Isaac Web site.
Citibank declined to discuss the addition, saying it is still in testing mode. And while it may be too early to tell whether Citibank customers will click through, Fair, Isaac is quick to point out that in its first three months myFICO.com had more than 40 million visitors. In the year since its launch, more than a million consumers have bought their Fico scores through the Web site (as part of Score Power, which sells for $12.95, or $38.85 for four looks).
Sue Simon, the Fair, Isaac vice president in charge of the myFICO business, said the new Fico product fits in with Citis general empowerment campaign. Citi, she said, is among many banks that have put themselves in the role of financial coach by offering consumers tools to identify their particular financial needs. Once that assessment is made, the bank can pitch its products and services.
Fair, Isaac says it will work with banks to develop bank-branded Web sites that are simply powered by Fair, Isaac, similar to the Intel inside tag a more customized approach than simply displaying a link to www.myFICO.com, Ms. Simon said.
Fair, Isaac is also bundling its Fico score into other products besides Score Power, and by so doing is bringing the company into more direct competition with Equifax, TransUnion LLC, and Experian Inc.
Over the next three to four months Fair, Isaac will introduce a consolidated credit report with data from all three bureaus plus a Fico score, which will sell for around $45 to $50. And over the next five to six months it will introduce the credit-monitoring product telling consumers when their Fico scores have moved into another score range or interest rate bracket. That product will probably sell for around $75 to $80, Ms. Simon said.
Banks that sell these products could retain a 15% to 25% commission, depending on the product offer and expected volume. With 150 million consumers who have Fico scores, its a huge business, Ms. Simon said. At a 20% commission, for example, it doesnt take long to get to the billions of dollars, she added.
Last month, using data from Informa Research Services Inc., Fair, Isaac began showing home mortgage and auto loan information on the myFICO Web site. At no cost, visitors can view any states average interest rate on various loan types for each of six different Fico score ranges.
In New York, for example, the fixed interest rate on a 36-month automobile loan would be 16.776% for applicants with Fico scores of 500 to 589 and 6.391% for those with scores of 720 to 850.
Using the Fico Score Loan Savings Calculator, consumers can also plug in their current score and their target score and determine how much they would save in interest paid over the life of the loan if they could just reach their target.
Seeing the impact, as Fair, Isaacs promotional materials call that moment of realization, might well steer customers to buy the forthcoming credit-monitoring product, which would tell them how close they were getting to their targets and, subsequently, the best time to apply for that loan.
Ms. Simon said banks could offer such credit tools on their Web sites and then make a product pitch according to the type of loan sought. In theory, she said, a customer would go to citi.com or chase.com or bankone.com, look up their score, look at their likely interest rate on a home equity loan based on a simulation, and then be taken back to the banks site for a cross-sell.
