Auto Loans And Bankcards Receive New Credit Scoring Model

April 9, 2009

Recently FICO announced that it is releasing an industry-focused version of its innovative credit-scoring model, FICO 08, is targeted at auto loans and bankcards. Initially, the model was developed to provide credit card companies with a more effective way to determine the potential risks of consumers, such as whether they will repay their loans or not.

This new release comes after an announcement by TransUnion, the credit scoring bureau, that the number automobile owners with outstanding loans 60 days or more overdue increased during the final quarter of 2008.

The revised auto credit scoring system is intend improve upon the current model by being able to recognize risks within a range of 5 to 15%. The other model, tailored for bankcard credit scoring, should have the potential to predict rates between 6 and 12%.

TransUnion has decided to release the score models under three different brands, the FICO Risk Score, the Classic Auto 08, and the Classic Bankcard 08.

Lisa Nelson, a spokesperson for FICO said, “Auto lenders and bankcard issuers today face a similar challenge – the need to grow their business with good customers while cutting their risks and losses.”

She went on to outline the system in more detail, saying that it will operate under the same scoring range, minimum scoring criteria, codes and inquiry treatment as the present version.

The introduction of new credit scoring models underscores the current state of the automobile buying market. With fewer potential buyers trusting the economy, there are less new vehicles being purchased. Many automakers are trying to innovative ways to provide people with incentives to buy their products.

It remains a balancing act between the insurers who must approve the consumers who do still wish to buy new vehicles and the efforts of many automotive sales professional to make buying a new car an attractive prospect in a trouble financial climate.