Definition
The FICO Expansion Score is a credit risk scoring model developed by Fair Isaac Corporation to address the needs of consumers with thin credit histories.
Analysis
The FICO Expansion scoring model includes same traditional credit records as the classic FICO and NextGen scoring models. However, it also adds alternative, or non-traditional forms of credit in order to calculate predictive credit scores for the estimated 50 million unscorables in the U.S.
The purpose of the FICO Expansion score is to open new markets to lenders while providing established risk predictability models that incorporate alternative forms of credit. It allows for credit scores to be calculated on consumers that lack established mainstream credit accounts.
This can include many people that have credit accounts that are not typically reported to the three main credit bureaus. Fair Isaac uses alternative commercial databases and data aggregators to obtain the non-traditional credit data used in the formula.
Some of the biggest targets addressed by the FICO Expansion Score include immigrants, recently divorced individuals, widows and widowers, younger adults and even ethnic groups that may not use traditional credit on a large scale. These consumers represent underserved markets that lenders are required to serve to stay compliant with federal regulations. Lenders want to be able to safely market to these consumers with acceptable and predictable levels of risk.
FICO Expansion scores are calculated on the same 300 to 850 range that classic FICO scores rely on. It goes much further than NextGen scores, since it incorporates alternative forms of credit left out of other risk scoring models.
The three main credit bureaus currently do not offer the FICO Expansion Score. PRBC offers it to lenders but does not currently have a consumer product.
