Definition
The Experian/Fair Isaac Advanced Risk Score is a version of the NextGen scoring model that is tweaked and marketed by Experian to lenders in an attempt to more accurately predict repayment risk among borrowers with poor credit histories.
Analysis
Demand for NextGen scoring products rose during 2004 to 2006 as the subprime mortgage market experienced rapid expansion. Experian developed their version of this risk scoring model for lenders that want to target borrowers with poor credit histories. These borrowers typically must pay higher interest rates in order to compensate for their higher expected default rates.
The Experian/Fair Isaac Advanced Risk Score is designed to provide greater predictability about a consumer’s likelihood to repay a debt, as well as their likelihood of experiencing various levels of delinquency. The idea is to also predict levels of profitable fee income.
Competitors to the Experian/Fair Isaac Advanced Risk Score include Equifax‘s PinnacleSM score and TransUnion‘s FICO Risk Score, NextGen. Each is sold to lenders directly by the major credit bureaus. No product is available to consumers.
