Confidential. This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation's express consent. © 2010 Fair Isaac Corporation. 1 FICO ® Score Trends in Dynamic Times Are today’s market pressures reshaping credit risk? Lamont Boyd Director, Scoring Solutions FICO November 2010

© 2010 Fair Isaac Corporation. Confidential. 2 2 Agenda »FICO ® Score Trend Research »FICO’s New Initiatives »FICO ® Score Migration

© 2010 Fair Isaac Corporation. Confidential. 3 Understanding FICO ® Score Dynamics »FICO ® scores are aligned to a “moving” odds-to-score relationship on a national level »FICO ® score distributions are not static, rather they are fluid and it is expected that they will change over time »Changes in data reported, consumer credit behavior, lender practices, changing economic conditions, score updates, etc. »Odds-to-score changes as consumer behavior changes For these reasons, it is important that each lender monitor and track their portfolio by FICO® score on a frequent basis and make adjustments to strategies as needed.

© 2010 Fair Isaac Corporation. Confidential. 4 Score Distribution All Industries, Newly Booked Accounts (Acquisitions)

© 2010 Fair Isaac Corporation. Confidential. 5 Alignment Plot Over Time All Industries, New Accounts

© 2010 Fair Isaac Corporation. Confidential. 6 Odds Shift Impact – 12 Month Score Shift All Industries, New Accounts FICO ® Score Interval Current Period Apr 09 – Apr 10 vs. Oct 08 – Oct 09 Prior Period Oct 08 – Oct 09 vs. Apr 08 – Apr

© 2010 Fair Isaac Corporation. Confidential. 7 Alignment Plot Over Time – 12 Month Performance All Industries, Existing Accounts (Customer Management)

© 2010 Fair Isaac Corporation. Confidential. 8 Score Alignment Plot – 12 Month Performance All Industries, Existing Accounts (FRD 12 San Francisco)

© 2010 Fair Isaac Corporation. Confidential. 9 Alignment Plot Over Time Real Estate, New Accounts

© 2010 Fair Isaac Corporation. Confidential. 10 Alignment Plot Over Time – 12 Month Performance Real Estate, Existing Accounts

© 2010 Fair Isaac Corporation. Confidential. 11 Alignment Plot Across Regions – 6 Month Performance Real Estate, Existing Accounts

© 2010 Fair Isaac Corporation. Confidential. 12 Summary Observations »The FICO ® score continues to rank-order risk effectively »Continued tightening in the lending market »Changes in default rates were less, at least partially due to increased lender controls and tightened lending policies »A score of 740 in 2010, represents the same level of risk as a score 700 in 2005 »The delinquency rates as of April 2010 held constant, and we expect a similar trend of stability or potentially a decline in the delinquency rates in the upcoming period This data is available in more detail via FICO ® Score Trends Service, which provides lenders and regulatory agencies with detailed information on the relationship between consumer credit behavior and the FICO ® Score.

© 2010 Fair Isaac Corporation. Confidential. 13 © 2010 Fair Isaac Corporation. Confidential. 13 Agenda »FICO ® Score Trend Research »FICO’s New Initiatives »FICO ® Score Migration

© 2010 Fair Isaac Corporation. Confidential. 14 Reasons for FICO ® Model Updates Changing data and behavior »New Data Reporters »New Credit Products »Consumer Trends »Economic Trends FICO ® scores are redeveloped to account for these changing trends in data

© 2010 Fair Isaac Corporation. Confidential. 15 Design Objective Superior predictive power BADS GOODS Score Accounts Stronger models spread “separation” between future goods and bads

© 2010 Fair Isaac Corporation. Confidential. 16 Enhanced Segmentation Scheme Refined Performance Classification FICO ® 8 Score Enhancements Defense Against Authorized User Abuse & Regulatory Compliance Support

© 2010 Fair Isaac Corporation. Confidential. 17 FICO ® 8 Mortgage Score Tailored to Mortgage Risk »A “mortgage-tuned” version of FICO ® 8 score with significant predictive ‘lift’ for mortgage risk compared to current FICO ® score »Uses base score and augments it for mortgage risk »Developed and validated on more recent development sample »24-month performance window »Validated on shorter 6- and 12-month windows »Includes new mortgage- and HELOC-related characteristics »Designed for use within underwriting and servicing

© 2010 Fair Isaac Corporation. Confidential. 18 Benefits of Mortgage-Specific Score »Underwriting »Improved risk assessment and expected defaults »Focused targeting of product and term features »Reduced Early Payment Default buy-backs »Improved exposure management »Servicing »More efficient alignment of resources to better target activities »Improved portfolio performance »Enhanced refinance/restructuring, cross-sell/up-sell targeting »Target Marketing »Improved segmentation »Focused messaging for marketing campaigns »Securitization »Refined cash flow »Improved performance evaluation for loan pool pricing/rating

© 2010 Fair Isaac Corporation. Confidential. 19 FICO ® 8 FICO ® 8 Mortgage Previous FICO ® Percent Total Accounts Percent 90+ Days Past Due Accounts Risk Tradeoff Curve Mortgage Loan Accounts - Account Management 2010 Fair Isaac Corporation. Confidential. Data provided by TransUnion, analysis conducted by FICO Data snapshots: April 2008 (observation) and April 2010 (performance)

© 2010 Fair Isaac Corporation. Confidential. 20 © 2010 Fair Isaac Corporation. Confidential. 20 Agenda »FICO ® Score Trend Research »FICO’s New Initiatives »FICO ® Score Migration

© 2010 Fair Isaac Corporation. Confidential. 21 Consumers’ scores are changing Fresher scores result in higher profit »Rise in delinquencies means a growing percentage of borrowers’ risk profiles are changing quickly »Lenders run the risk of making decisions with stale information on a significant portion of borrowers’ accounts »Lenders are considering updating FICO ® scores more frequently »Lenders are asking: »How often should scores be refreshed? »How many consumers will have significant changes in the short term? »How much will their scores change and over what period of time? »How much will my profit improve by utilizing fresher scores?

© 2010 Fair Isaac Corporation. Confidential. 22 Positive score difference equates to score increase over time Confirmation of Significant Changes Quarterly score refreshes may not be enough Over 25% of scores changed by more than 20 points over 3-month period Significant enough to alter the balance of risk Snapshot 2

© 2010 Fair Isaac Corporation. Confidential. 23 Bankcard Portfolio Current FICO® Observation Score (Feb 09) 6-Month Migration Amount (Aug 08 to Feb 09) < Low to %34%22%14%12%4% -40 to %15% 13%12%9% -20 to 20 29%36%47%56%57%69% 21 to 40 6%9%11% 12%11% 41 to High 2%6% 7% Total 100% Least Risky Customers Are More Stable 6-Month Migration

© 2010 Fair Isaac Corporation. Confidential. 24 Bankcard Portfolio Current FICO® Observation Score (Feb 09) 1-Month Migration Amount (Up to Feb 09) < Low to -41 9%8%5%2% 0% -40 to %8%6%4%3% -20 to 20 75%79%85%90%92%94% 21 to 40 5%4%3% 2% 41 to High 0%1% Total 100% Fluctuation Occurs in a Single Month 1-Month Migration

© 2010 Fair Isaac Corporation. Confidential. 25 »Rise in delinquencies means a growing percentage of borrowers’ risk profiles are changing quickly »A significant percentage of scores migrated up or down more than 20 points »Over 43% of scores changed over 9-month period, making the volume of changes too difficult to manage »Higher scoring customers remain more stable while riskier customers exhibit more fluctuation »Frequent score updates will guide lenders in taking appropriate actions with their best customers, especially for those accounts which experience a drop in score »The most current score for a given account is the most predictive »Refreshing scores on a quarterly basis at a minimum, preferably on a monthly basis, helps lenders make a more informed decisions on account treatment Summary and Recommendations Fresher scores will result in higher profit

Confidential. This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation's express consent. © 2010 Fair Isaac Corporation. 26 THANK YOU Lamont Boyd