FICO Opens Financial Inclusion Lab to Lenders to Expand Lending Decisions

FICO has debuted a pair of services to help lenders make better credit decisions.

The analytics company Wednesday (May 10) announced the launch of its Inclusion Accelerator Program and Financial Inclusion Lab to promote lender use of alternative data solutions, part of FICO’s “Global Financial Inclusion Initiative.”

“As a longtime innovator in the use of alternative data in credit scores, FICO’s Inclusion Accelerator Program and Financial Inclusion Lab will be a catalyst in enabling the lender community to foster broader alternative data adoption, and enable a more inclusive lending system rooted in accessibility,” the company said in a news release.

According to the release, lenders who take part in the accelerator or inclusion lab can access tools and technology to expand their lending decisions and support financial inclusion initiatives.

The launch is happening at a time when there’s a wealth of potential for FinTechs and financial institutions to meet the needs of millennials, as noted here in a recent report on how alternative data and scoring models can help deepen financial inclusion.

Data from the Federal Reserve shows that 40% of millennials have a subprime credit score, while 57% say their scores kept them from receiving a financial product in the past year.

Meanwhile, the PYMNTS report “How Credit Insecurity is Changing U.S. Consumers’ Borrowing Habits,” identified the segment of the population that ends up marginalized because of past experience: They’re the quarter of all consumers rejected by companies at least once when applying for credit products.

That report found that credit-marginalized consumers are less likely to seek new credit products. Twenty-six percent of those defined as marginalized say they avoid applying for new credit because they have low credit scores. Another 21% worry about being rejected.

“Alternative scoring models and alternative data points might help broaden access to credit,” PYMNTS wrote. “Those data points include everything from phone and electric bills, and other utilities, to rent and personal loans.”

In just a few examples, Sezzle Up lets users of its buy now, pay later (BNPL) solution choose to report their payment behavior to agencies.

Meanwhile, SoFi and LendingClub have leveraged their platforms to provide credit-building ecosystems, with deposit accounts and personal loans that build credit histories would-be lenders can use to underwrite cards and other financial services offerings.