TheMReport

December 2016 - Getting Serious About Diversity

TheMReport — News and strategies for the evolving mortgage marketplace.

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TH E M R EP O RT | 29 FEATURE • • Orthogonality.•Useful data sources should be supplemental or complementary to credit bureau reports. For example, if a repository collects only foreclosure data from public record information, that data may add little value since it is already largely captured in bureau reports. Credit scoring models that use the right alternative data can deliver predictive results in line with traditional credit scoring models used by lenders today. Becoming Credit Visible– Responsibly T he industry goal should not be to just generate more credit scores, but to en- sure those scores enable lenders to safely and responsibly extend credit to a broader group of people. Leveraging alternative data is a critical tool to generate meaningful, predic - tive scores that reveal many creditworthy individuals who would otherwise still be left out of mainstream credit. It also is the only means to assess nearly half of the credit "invisibles," or the more than 25 million consumers who have no credit file on record at the traditional credit bureaus. FICO research shows that by using this ap - proach, millions of newly scorable consumers achieve high enough scores to gain access to credit. Among unscorables with a high alterna- tive data score, most granted credit go on to manage their financial obligations responsibly. Leveling the Playing Field Isn't About Lowering Standards B y incorporating alternative data, lend- ers can effectively identify good risks and safely expand access to credit in a controlled, responsible, and predictive way while ensuring a quality score and quick access for consumers. And unlike a credit- bureau-only score built for this newly scorable population, these scores are dynamic and will improve with continued on-time payments of standard bills. Enhancing sparse traditional credit files through integrating rich data sources such as payment history on cable and other accounts will enable us to provide unbanked consum - ers a safe onramp to mainstream credit. In doing so, we can ensure the integrity of our scoring standards as well as the expansion of credit scoring to a broader, more inclusive and more diverse group than ever before. JOANNE GASKIN, AMP,•Senior• Director,•oversees•FICO ® •Score's• regulatory•practice•and•mortgage• solutions.•She•has•led•analytic•and• product•development•to•address•regulatory•stress• testing,•capital•allocation,•portfolio•credit•risk• management,•and•mortgage•strategic•default,• resulting•in•several•patents.•For•further•details•on• this•topic,•see•the•FICO ® •white•paper,•"Can• Alternative•Data•Expand•Credit•Access?" "The industry goal should not be to just generate more credit scores, but to ensure those scores enable lenders to safely and responsibly extend credit to a broader group of people." www.4prescient.net 888.653.8357 Identify Associations Retrieve Pertinent Documents Determine Account Statuses Compliance & Complete Payment Services H O A A C C O U N T M A N A G E M E N T H O A A C C O U N T M A N A G E M E N T

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