FICO, FICO, FICO…we’re all familiar with the dominant credit scoring system used in the financial services environment. But, did you know that there are different “flavors” of FICO scores used by auto, credit card and other lenders? In fact, if you’ve applied for a credit card or an auto loan in the past 15 years your FICO “Industry Option” score was probably pulled by the lender. So, what is an industry option FICO score?
An industry option score is a semi customized scoring model tuned specifically to evaluate risk for a certain type of financial services product. Think of it this way…if you are an auto lender then aren’t you most interested in how your applicants have paid their past auto loan obligations? Of course you are. You’re concerned about how they’ve paid all of their past obligations but auto loan experience will likely be the most important in your mind.
The FICO industry option scores take a deeper look at how the consumer has managed specific types of credit obligations and assigns a score the predicts how well the consumer will pay back THAT type of debt. There are five FICO industry option scores – auto, bankcard, personal finance, installment and mortgage. The auto, bankcard, personal finance, and installment are the oldest of the industry options. The mortgage version is the newest.
The auto option is built to be used by auto lenders, auto financepanies and auto dealers in their lending decisions. The bankcard option was built to be used by bank credit card issuers. The personal finance option was built to be used by financepanies, such aspanies that finance furniture, appliances, TV’s and audio equipment. The installment version was built to be used by installment lenders. And finally, the mortgage option was designed for mortgage lenders.
Let’s take a deeper look at one of the mostmonly used industry option scores….auto. The auto option was built on credit files that had an auto loan. It predicts credit behavior on auto loans, specifically. Even if you don’t have an auto loan on your credit report, it can still predict how you will pay back an auto loan.
Don’t forget, there’s still the generic FICO credit score, which can be used by any lender for any reason. The primary difference between the FICO Industry Options and the generic FICO score is that the industry option predicts credit behavior for a particular industry while the generic FICO score predicts credit risk on any account from any industry. And, your industry option scores are NOT going to be the same….and they won’t be the same as your generic FICO score. For example, you could easily have a set of FICO scores that looks like this;
Generic FICO score – 750
FICO Aut0 – 740
FICO Bankcard – 764
FICO Personal Finance – 741
FICO Installment – 755
FICO Mortgage – 763
They’ll be close, but they won’t be the same.
The industry option FICO scores are not currently available for retail sale to consumers. However, with the new Risk Based Pricing Rules and the eventual implementation of the Fair Access to Credit Scores Act in July 2011 we’ll be seeing them for the first time with adverse action letters.
John Ulzheimer is the President of Consumer Education at SmartCredit, the credit blogger for Mint, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit, John is the only recognized credit exper
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