Study shows value of rental data in credit scoring models such as FICO® Score 9 in providing credit visibility for thin-to-no credit profiles
SAN JOSE, Calif., Feb. 14, 2020 /PRNewswire/ -- Leading analytics software firm, FICO, partnered with the Department of Housing and Urban Development (HUD) and the Policy and Economic Research Council (PERC) on a new study examining how reporting rental payments to consumer reporting agencies (CRAs) impact consumers with thin-to-no credit profiles or low credit scores.
The first-of-its-kind study from HUD and PERC, "Impacts of Credit Report Public Housing Rental Data," analyzed the ever-present issue of credit invisibility, which can limit housing options for approximately 54 million people in the U.S.
The study assessed credit scores of more than 9,000 HUD-assisted households across Cook County, IL, Louisville, KY, and Seattle, WA, using credit risk models, including FICO® Score 9. One of the key findings reinforced the benefits of reporting rental payment data to consumer credit agencies, by showing that there was a significant increase in the number of HUD-assisted tenants with credit scores above 620. Additionally, the rate of 'unscorable' tenants also fell substantially.
"Financial inclusion remains a top priority for FICO, so working with HUD and PERC on this study was a natural fit," said Joanne Gaskin, vice president of Scores and Analytics at FICO. "When we calculated FICO Score 9 for the study, we found that a majority of households who were previously unscorable received a credit score after the addition of rental payment data. FICO is eager to continue to work with HUD to encourage broader inclusion of rental data at the CRAs to support consumers' access to affordable credit."
In 2015, FICO introduced FICO Score 9, which factors in rental payment history into the score when it's reported to the CRAs. The launch of FICO Score 9 coincided with the first evidence of sufficient positive and negative rental data at the consumer credit agencies, a necessary condition for adding this data into the FICO Score algorithm. FICO Score 9 is the latest version of FICO's credit scoring model currently available at the three main CRAs.
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956 and based in Silicon Valley, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 195 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, manufacturing, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 100 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time. Learn more at www.fico.com.
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