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FICO’s Mortgage-Specific Credit Score Aims to Reduce Default Risk

The Minneapolis-based analytics and credit score company ""FICO"":http://www.myFICO.com announced Tuesday that its newest credit scoring product, the ""FICO 8 Mortgage Score"":http://www.fico.com/en/Products/Scoring/Pages/FICO-Mortgage-Score.aspx, is now available from all three major U.S. credit reporting agencies.
[IMAGE] The FICO 8 Mortgage Score was built specifically to help mortgage lenders better predict mortgage performance and improve credit decisions for both current and prospective homeowners.

The company says it will allow lenders to employ a more precise risk assessment tailored for today's real estate market, which will ultimately help to support market stability and reduce the likelihood of default â€" a plus for all parties in the chain, including the borrower, lender, and mortgage investors.

The score analyzes the borrower's full credit history on file to assess mortgage repayment probability, which FICO says will aid lenders and servicers in earlier identification of borrowers at risk so they can mitigate the incidence and high cost of foreclosure.

Validation results have demonstrated an additional predictive value of up to 15 percent for mortgage servicing

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over the broader-based, all-industry FICO Score used most widely today, according to a statement from the company.

""The FICO 8 Mortgage Score's broad availability means that all U.S. lenders and servicers can now easily access scores that are fine-tuned for mortgage performance,"" said Jordan Graham, EVP of scores and president of consumer services at FICO.

Graham added that the new mortgage credit scoring model can be used in conjunction with the FICO Economic Impact Service to allow financial institutions to adjust their lending policies and strategies quickly based upon forward-looking economic modeling.

""To do the best job of evaluating risk and increasing profits, lenders need updated credit scoring analytics that incorporate mortgage credit performance since the subprime mortgage meltdown,"" commented Craig Focardi, senior research director at ""TowerGroup"":http://www.towergroup.com, a research and advisory firm focused exclusively on the global financial services industry. ""The availability of mortgage credit scores across all three credit reporting agencies will enable lenders to upgrade their loan underwriting and account management practices.""

The FICO 8 Mortgage Score retains the same 300-850 scoring range, minimum scoring criteria, authorized user, and inquiry treatment as the general-risk FICO 8 Score, which has been adopted by more than 3,000 lenders since becoming available last year.

To improve predictive capabilities specific to the mortgage market, FICO Mortgage Score assesses several additional data variables from consumer credit files to distinctively measure mortgage repayment risk. FICO Mortgage Score includes additional score reason codes compliant with the Fair Credit Reporting Act (FCRA) that help lenders understand and explain the scores to applicants.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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