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Lights, Camera, Action: FICO 08 is live at ExperianIn the world of credit reporting agencies, it generally takes two of the bureaus to implement a new tool in order to get the third to agree. This case is no different. Equifax originally publicly committed to not install FICO 08 due to a lawsuit filed in federal court that named the Atlanta-based credit bureau as a defendant. The parties settled the suit, agreed to expand their relationship, and eventually FICO 08 was installed. Experian fell in line soon after Equifax made the model available to lenders. There’s no doubt that their customers played a not-so-small part in prompting them to install FICO 08. The threat of losing large clients to a competing credit bureau for the sole purpose of wanting access to the newer, better credit score is real. Experian was wise to acquiesce. Now that it’s a “tri-bureau” model, you’re likely to see an accelerated adoption by credit score users. And you’re likely to see the credit industry influencing entities, such as Fannie Mae and Freddie Mac, and the credit rating agencies ramp up their evaluation of the model to determine how and if they would like to see their lending bodies use it to make underwriting decisions. “FICO 08 is being adopted at a greatly accelerated pace”, according to Craig Watts, FICO’s Public Relations Manager. “According to our records, there are already 400 companies either using it or testing it.” This also signals yet another blow to competing credit scores as FICO 08 means the introduction of another demonstrably superior FICO score to the market. Taking market share from FICO has been difficult. In fact, according to court documents filed in the aforementioned lawsuit, FICO’s market share is at 75 percent. This illustrates the difficulty in replacing an engrained credit scoring system. FICO 08 also signals a faster end to illicit “piggybacking” whereby consumers could artificially inflate their scores by paying a stranger to add them as an authorized user to a high limit/low balance credit card. FICO 08 has preventative logic that dilutes that threat. All in all, Experian did the right thing regardless of whether or not they really wanted to.
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