Analytic software leader FICO today reported that it is seeing strong demand by telecommunications providers for the FICO® Score to use in securitization. FICO has created a program that helps carriers and other participants provide the risk assessment that is a key ingredient in creating bonds backed by equipment installment plans, which let customers pay off their mobile device in installments.
The ratings agency Standard & Poor's estimates there are $35 billion to $40 billion of mobile device contracts in the U.S. The first security, backed by 2.5 million equipment installment plans, was issued in July. Mortgages and other loan types are already widely securitized in the U.S.
"Telecommunication providers are increasingly realizing that — at a nominal expense — they can capture the many benefits of adopting the industry-standard FICO Score," said Jim Wehmann, executive vice president for Scores at FICO. "When hundreds of millions of dollars are at stake, investors, rating agencies, insurers and issuers turn to the reliable score they can trust, the FICO Score. All market participants, including investors in securitized consumer loans, benefit from having a single common metric of credit risk."
Under the new program, a mobile provider that purchases FICO Scores on its customers whose equipment installment plans are being securitized can share summary statistics regarding the FICO Score distribution with third parties as part of the securitization performance documentation made available to rating agencies and investors. Telecommunication providers can also structure the purchase of these FICO Scores for use in their risk management decisions at origination or account review. Such FICO Scores are also eligible for the FICO® Score Open Access program, which allows credit grantors to share the FICO Scores they rely on for risk management with their customers at no additional fee from FICO.
The program is driving strong interest from multiple market participants in an industry that, until now, has not utilized generally available credit scores. "The low cost and strong benefits make choosing the industry-standard FICO Score over other scores an easy decision," Wehmann said.
The FICO® Score is the standard measure of US consumer credit risk, and is used in more than 20 countries. More than 10 billion FICO Scores are purchased each year by lenders. Besides FICO Scores, FICO also offers risk management and marketing solutions to telecommunications providers, and works with leading providers worldwide.
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956 and based in Silicon Valley, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 170 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 100 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.
Learn more at http://www.fico.com
FICO is a registered trademark of Fair Isaac Corporation in the U.S. and other countries.
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