The Fair Isaac Corp., the parent of the widely used FICO credit score, is emphasizing the ways some of its analytical tools can help credit unions and other card issuers better target their card offers.
In a white paper published to support its fresh approach, FICO said that the tools can help card issuers "adopt a more holistic, customer-centric view of the business; refine and sharpen customer segments; accelerate innovation in new products and sources of revenue and optimize capital allocation."
Possible applications include helping a credit union predict how a member might perform on other loans if their credit card account becomes delinquent and how a credit union might better cross sell other loan products to members who already carry its credit card.
"I think there may be a perception that we only work with larger clients," said Lynda Woodward, principal scientist for the consumer behavior firm. "But almost all of our tools are completely scalable, and we can help any size institution meet its goals."
FICO tools can play an instrumental role in helping CUs avoid interest rate pitfalls in card issuance by helping them better predict their card members' behavior once he or she has a card, the company said.
Prior to the CARD ACT, card issuers could afford to be more general in their card offers, steering members to a card based on their general credit scores, Woodward maintained. Now, credit unions and other card issuers can use FICO tools to more accurately price their card offers from the beginning, potentially saving a great deal of money.
Essentially, FICO wants to see credit scores used less as a on-off switch or cutoff line.
Rather, FICO wants to see its scores become part of the planning process for a new card offering or platform change, according to Woodward and the firm's white paper.
"Analytics can be used to facilitate an iterative approach to planning via construction of an interactive map of the problem you're trying to solve, complete with decision levers, reactions to decisions and ultimate objectives, " wrote Andrew Jennings, chief research officer at FICO and author of the white paper. "By mapping the connections among these, you can lay bare the assumptions behind your planning, and use those assumptions-along with any relevant data-to 'see what happens' when you change some of the factors."
The overall change FICO is trying to help card-issuers make is one from looking at cardholders or potential cardholders primarily in groups and instead trying to see them as individuals, Woodward explained. Thus, one of the tools FICO offers now tries to predict a cardholder's behavior if the credit limit is raised and what impact that might have on the cardholder's other loan accounts, she said.