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June 07, 2011

  • News:  Citi Runs With FICO 8 

    When considering whether or not to issue a credit card to any particular individual as well as the amount of credit that will be given, most lenders use a system called FICO. An individual's FICO score is calculated using a number of variables including an individual's use of available credit and the amount of credit card debt as well as payment history. The FICO company first introduced its credit scoring system in the late 1950's. In 1987 Equifax introduced its first general-purpose FICO score. FICO rolled out a new credit scoring system in 2009 called FICO 8. The new credit scoring system is considered to be 15 percent more reliable in predicting at-risk credit cardholders than the original FICO scoring system.

    Although the system has gained popularity over the past two years, major credit card companies have only used the program in test mode. That will soon change after the announcement by FICO that Citi Cards, one of the nation's largest credit card companies, is now fully running with FICO 8. Citi Cards is a subsidiary of Citigroup has integrated the FICO 8 score as a major component of its credit management system. Robert Duque-Ribeiro, Vice President and General Manager of FICO Scores said that the transition from the traditional FICO credit scoring system to the FICO 8 system is a time consuming as it travels through the testing stage to validation of each company that comes on board.

    Citi Cards has been testing the accuracy of the FICO 8 credit scoring system over the past 18 months and has found a high reliability in predicting higher risk individuals of credit card defaults. A Citi Cards' representative said that the company has found the new scoring system has improved their ability to predict customer risk and have implemented company wide use in all its lending decisions. Greg Pelling, FICO Vice President of Scores and Analytics noted that FICO 8's superior capabilities make the credit scoring system the perfect solution in managing credit risk.

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