New Tool Predicts Consumers’ Ability To Take On Debt

Posted by Orb Staff on July 21, 2009 No Comments
Categories : Residential Mortgage

x and FICO have jointly developed the Credit Capacity Index, which the company says is the first forward-looking risk management tool that ranks consumers based on their ability to take on future debt. Available through Equifax, the Credit Capacity Index enables lenders to strengthen their account acquisition and account management strategies while minimizing exposure to potential losses, the companies say. "We believe it will be particularly valuable to lenders for improving control over loss exposure and reserves and increasing profitability during today's uncertain economic times," says Robert Duque-Riberio, vice president and general manager of scoring for FICO. "Furthermore, the ability to understand a consumer's capacity to handle debt will be critical when managing growth as the economy improves." FICO optimized the Credit Capacity Index to be used in tandem with BEACON credit scores, which ranks consumers' repayment risk based on current credit profile information. Both scores are built on Equifax credit data and can be leveraged by lenders as part of other risk management strategies when making credit decisions. The index may help lenders and the secondary mortgage market by helping them to better predict which borrowers with adjustable-rate home loans can handle higher payments once their loan rates reset, the companies add. SOURCES: Equifax,

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