On April 29, news broke that Wall Street resulted a shocking 12 percent drop in the well known Fair Isaacs' credit scoring giant. FICO is feeling the affects of the credit crunch, with consumers cutting back on making big purchases, banks tightening on lending, and credit card companies tougher restrictions, are hurting the demands for the credit scores. At the same time FICO pricing is having heavy competition with other credit scoring firms.
Fair Isaac CEO Mark Greene's efforts to improve the automated scoring system, cutting the cost, and reconstructing the sales is not working and has announced that a plan to push out six money eating lines of business.
In early 2006, the companies share fell from $50 to $35 by November, when then CEO Thomas Grudnowski stepped out of his position. Now the shares are less then $25 making times harder for the business due to the exotic trends of the sub-prime lending.
Fair Isaac Corp., is introducing a new and improved product model called FICO 08 that will help address some of the past complaints and flaws in their product. FICO 08 will due better in predicting potential loan defaulting. Supposedly the new system will reduce default rates on consumer debt by 5 to 15 percent by changing:
Authorized Users- The new credit scoring system eliminates "piggybacking" which allows an individual with poor credit or no credit to be an authorized user on an account holder with strong credit to help build credit score.
Delinquency- FICO 08 will be more forgiving to consumers that have occasionally slipped on making payments on certain bills but are still current on the rest of their bills, while coming down harder on repeat offenders.
The scoring criteria will still remain in the range of 300 to 850. The factors that would take into account to determine the scoring will remain the same like payment history, credit history, amount of debt, and the ratio of debt.
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