FAST FIVE: FICO Introduces New Credit Measure
The FICO score has since become the de facto measure for measuring an individual's creditworthiness, with 90% of top lenders using it to make billions of credit-related decisions each year.
The CFPB saw a noticeable jump in the number of complaints relating to mortgages and credit cards mentioning the keyword “coronavirus.” “In March and April 2020, the Bureau's Office of Consumer Response received approximately 36,700 and 42,500 complaints, respectively – the highest monthly complaint volumes in the Bureau's history,” the CFPB said.
This may not seem like much of a big deal, but can be interpreted as a leading indicator signaling credit scores could be deteriorating.
As a result, FICO introduced a new credit measure yesterday-the FICO Resilience Index, which will complement the FICO Score and “helps lenders, borrowers, and investors make more informed and precise decisions in assessing risk during rapidly changing economic cycles.” The FICO Resilience Index will take into account similar metrics, such as credit usage, payment history, number of accounts, credit history and current balances, to determine a borrower's ability to withstand a period of economic disruption.
The Index will rank borrowers on a scale of 1-99, with 1-44 being more resilient and 70-99 being very sensitive to shifting economic conditions.