Credit Card Borrowing & Lending

FICO® Score Industry Insights

Host Lance Braun (FICO Score, Marketing) and guest David Binder (FICO Score, Product Management) discuss how to assess latent credit card portfolio credit risk as a function of consumer resilience, leveraging the new FICO® Resilience Index.

1. The FICO® Resilience Index is designed to allow portfolio managers to discover, assess and manage latent risk within portfolios of consumer borrowers bearing similar FICO® Scores, without cutting off access to credit for resilient consumers
2. Leveraging traditional consumer credit data, it is designed to rank-order consumers by their sensitivity to a future economic downturn
3. It offers a simple, powerful complement to the FICO Score for an array of use cases, including some specific to credit card portfolio account management, such as credit line increases / decreases and initial credit line assignment
4. In today’s uncertain environment, with increases in interest rates, job losses, and rising inflation, institutions should seek greater insight into consumers’ resilience to market downturns.

A credit score predicts a borrower’s likelihood of default based on the borrower’s past and present credit performance.* On the other hand, determining a borrower's resilience during periods of economic stress has historically been a challenge. How can lenders and portfolio managers have deeper insights about borrower behavior in the event of a severe economic downturn? The FICO® Resilience Index (FRI), a new analytic tool, identifies the incremental risk that a consumer will default due to economic stress in the future.