Global non-bank lender wins FICO® Decisions Award for Financial Inclusion using FICO® Score
Worldwide non-bank bank wins FICO® ChoicesGrant for Money relatedIncorporationutilizing FICO® Score
Highlights:
Home Credit has cut credit risk on point-of-sale (POS) loans by 25 percent and online loans by 15 percent, without reducing lending volume.
By incorporating the FICO® Score X Data, Home Credit can underwrite objectively new clients not covered by traditional scoring due to a lack of credit bureau history.
Home Credit won a 2019 FICO® Decisions Award for Financial Inclusion.
Home Credit, a global non-bank consumer lender, has successfully reduced its credit risk while maintaining loan volumes and keeping approval rates steady by incorporating the FICO® Score X Data to optimize its loan process in China. The score was used in addition to data from loan applications, Home Credit’s existing internal scorecards, and other external data sources to cut credit risk on point-of-sale (POS) loans by 25 percent and online loans by 15 percent compared to the old generation of models.
The FICO® Score X Data uses alternative third party to produce a score that is highly predictive for consumers who are both experienced or new to credit.
The introduction of the score has enabled Home Credit to underwrite and evaluate new clients with a thin file more objectively. This has been a big focus for the business in response to strong market demand for consumer loans in China.
“We have always strived to improve our risk assessment for new clients while keeping the approval rate at a reasonable level so that we can provide a service to as broad a part of the population as possible,” said Tomas Klinger, Decision Science and Data Director at Home Credit. “This type of financial inclusion is good for the consumer and good for our business. By increasing our volumes and better understanding the behavior of our clients we can look to offer them larger and longer-term loans in the future at a lower risk.”
Home Credit’s risk assessment utilizes a similar structure to the FICO® Score – it builds a sub-score for every data source and the final scorecard is then a relatively simple combination of those components. This allows Home Credit to calculate the value and importance of each contribution to the final score as well as the cost-benefit analysis.
This level of control allows Home Credit to adjust quickly to market changes or data outages in China. Using the FICO® Score X Data, Home Credit has boosted its scorecard performance by 2 gini points and processed more than 1.2 million applications a month, meaning it can now lend to a larger portion of Chinese consumers at significantly lower risk.
“Home Credit has successfully expanded its acquisition business to help more consumers gain access to credit,” said Sandy Wang, managing director of FICO China. “The team has been methodical in building a dynamic and robust scoring tool and Home Credit participates on the development. Home Credit’s feedback and cooperation has been valuable for us when constantly adjusting and recalibrating the score to adapt to market headwinds to ensure that the model provides a fair assessment of consumer credit risk. They are one of our most sophisticated clients in terms of advanced analytics.”
For its achievement, Home Credit was awarded the 2019 FICO® Decisions Award for Financial Inclusion.
“Advanced data analytics is embedded in Home Credit’s entire loan process and many of its customers were able to take out their loans via the lender,” said Sharon Kimathi, editor at FinTech Futures, one of the FICO Decisions Awards judges. “By overcoming the information limitations of traditional scoring and utilizing the FICO Score to optimize risk assessment, Home Credit has created a successful credit scoring model and, in the process, provided lending to underserved consumers.”
