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Equifax Inc. and Fair Isaac Corp. today unveiled the Credit Capacity Index, a risk-management tool designed to help credit card issuers predict borrowers' ability to take on additional debt. The tool can help issuers determine which new or existing borrowers can handle a credit-line extension and which ones would be better off with a frozen or reduced credit line, the companies say. "In order to survive today's tough economy, a lot of credit card issuers are pulling in consumers' credit lines to avoid further losses from those who are unable to pay back their loans," Careen Foster, director of scoring product management at Minneapolis-based FICO, tells CardLine. "This new index allows issuers to see how consumers will react to new debt, based on their current risk profile and their debt-repayment history, so they can take advantage of opportunities and avoid more losses." FICO developed the Credit Capacity Index using Atlanta-based Equifax's credit bureau data. The companies claim it is the first such tool that provides a glimpse into borrowers' future response to taking on more debt. Existing tools focus solely on borrowers' past behavior. Equifax markets the index as an add-on product alongside its Beacon credit scores. The new index should be useful for a broad range of card issuers, from the largest to smaller and regional card issuers, Foster says. "This index brings an additional layer of risk management to lenders, and it protects consumers, too, by helping them to avoid taking on debt they can't handle," she says.
