1. Credit Profiles of the Credit Invisible Population
Can Alternative Data Help Expand Credit Access?
Joanne M Gaskin
Senior Director, Scores and Analytics
FICO
October 2016

2. Research Briefing
Challenge: Millions of consumers that lack credit history have difficulty obtaining credit from mainstream financial institutions
Observations: Two change dynamics impacting consumer lending
Some alternative credit data sources have developed to a scale that support inclusion into a national system
Lenders are seeking opportunities to extend credit to more borrowers, including traditionally underserved consumers
Findings: FICO’s research demonstrates the opportunity to extend responsible risk assessment to a broader consumer population

3. What Drives a FICO® Score?
“The Five Information Zones”
Approximately 170–200 million consumers have credit files to support a FICO® Score
FICO minimum scoring criteria is a single recent and updated trade line (at least 6 months old and updated within the last 6 months)
Over 28 million consumers lack this minimum criteria in their credit files, another 25 million have no file on record
“Alternative credit data” is defined as information outside the traditional credit file 1 2 3 4 5

4. Research Insight #1
The Unscorable Population is Comprised of Very Different Segments
Collections or adverse public records only %
Involuntary inactive credit
39%
28m
Sparse or inactive credit files
Voluntary inactive credit
25%
Inquiries only or credit less than 6 months old
10%
25m
No traditional credit file on record
Inactive credit 64%
Collections or adverse public records only
26%

5. Research Insights into the Unscorable Population
Segments
Median Age
Traditional Credit Data Available
Typical Application Rate
Scorable Rate with Alternative Data
Segment Bad Rate
Voluntary Inactive 71
Stale Accounts – Median time since last update is 4 yrs
1- 4%
43%
6.2%
New to Credit 24
Inquiry Only or credit less than 6 months old
35-45%
76%
18.4%
Derogatory 43
Stale accounts or none at all (e.g. collection only file)
20-30%
47%
34.2%
No Traditional Credit File 25
None
54%
14.6%

6. A Glimpse into the Unscorable Applicant Population
Average age of the Credit Bureau No-Hit and New- to-Credit segments are roughly 24 years of age 4%
26%
44%
14%
12%

7. Research Insight #2 InterACT 2008
Using Alternative Data We Can Identify More than a Third Scoring Above 620

8. Research Insight #3
Applicants of higher credit quality include many new credit seekers
Over 60% of applicants scoring over 620 are comprised of consumers with no credit file or inquiry only files
Traditional credit data alone is insufficient to assess risk on these sparse/no file applicants
11% 6%
45%
20%
18%

9. FICO® Score 9 Greater Than:
InterACT 2008
Research Insight #4
Consumers with Higher a FICO® Score XD Maintain High Traditional FICO® Scores in the Future
FICO® Score 9 Greater Than:
% of Population
620
78%
660
67%
700
49%
740
25%

10. Research Insight #5
Non Scorable Population Using Bureau Data Alone - Lower Score Distribution

11. Key Insights Not all unscoreables are alike
A sizeable portion are “Gen Z” and Young Millennials
Alternative credit data can be very effective in providing useful insight to those previously “invisible” rather than using traditional credit data alone
A FICO® Score using alternative credit data, such as FICO® Score XD, identifies a large percentage of previously unscorable Gen Z and Young Millennials
Previously unscorable consumers that score higher with this new approach go on to maintain good credit standing when a traditional credit history is established

12. Thank you!