FICO has launched a credit risk prognosis tool financial institutions can use to stress-test their consumer loan portfolios.

FICO's Score Economic Calibration Service 2.0 is designed to forecast how consumer credit risk could change under different economic scenarios as a way to measure eventual bank losses and capital reserve needs.

The new tool combines FICO's methodology with Moody's Analytics projections that assess roughly 1,800 economic variables including labor market trends and interest rates.

Banks can use the software to comply with regulations and to make capital planning decisions at a portfolio and individual account level, Jim Wehmann, executive vice president, FICO scores, said in a news release.

Moody's national and regional economic data forecasts are based on the Federal Reserve Comprehensive Capital Analysis and Review, Dodd-Frank Act’s Stress Test scenarios, and the Corelogic Home Price Index, to provide a forward-looking estimate of consumer delinquency risk for each FICO Score range.


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