TransUnion and FICO Partner to Expand Credit Access in South Africa

TransUnion Africa has extended its longstanding partnership with global analytics provider FICO with the launch of FICO’s newest credit scoring tool, FICO® Score 6. The tool will help drive greater financial inclusion by supporting South African and regional lenders’ efforts to lend to more consumers who were previously unscoreable, as the combined offering is able to score a greater proportion of the South African adult population using its Expansion Risk Indicator (ERI).

Designed to be one of the most powerful and predictive scores yet, it will be available in late 2022 through TransUnion.  The new version of the score can help lenders build healthier portfolios based on the latest consumer credit data and trends.

The score was developed using the latest TransUnion data, making it ideal for South Africa’s large and dynamic population. TransUnion’s recently released Financial Inclusion study showed that more than 20 million South African consumers were credit unserved and a further 7 million underserved, i.e. credit active but with limited participation, at the end of March 2022.

“Our data shows that only 16 percent of these underserved consumers migrate to being credit served every two years, despite our analysis showing that these consumers perform as well, if not better, than the credit served consumer community. With improved predictability and granularity, FICO® 6 can play a significant role in bringing these low participation consumers into the formal economy. Furthermore, FICO® Score 6 can help lenders offer consumers the opportunity to get the financing they need to overcome any pandemic-related setbacks, or even enter the economic mainstream for the first time,” said Lee Naik, CEO of TransUnion Africa.

FICO and TransUnion have been working together for more than two decades to empower credit grantors in South Africa and key neighbouring countries with credit risk scores. The new tool improves the assessment of a borrower’s credit risk over previous versions by providing a strengthened predictor of a consumer’s likelihood to default and expands on the modelling approach with additional features and insights.

It presents a familiar range of 300–850, with higher scores indicating lower credit risk. Based on the score, lenders can make better informed decisions on borrowers across customer segments, credit products, and lifecycle phases from account origination to account management.

Expanding Credit Access

FICO® Score 6 includes an Expansion Risk Indicator (ERI) that scores people who do not have enough credit history to calculate a standard FICO® Score boosting financial inclusion. The ERI captures additional insights from expanded/alternative TransUnion data, and provides eight indices to differentiate credit risk, enabling lenders to make more informed decisions for consumers. For currently credit invisible people, the new ERI model will allow lenders to score twice as many applicants as the model it replaces and make more effective choices for consumers with thin credit files or no credit history.

Explainable Credit Decisions

Reason codes and narratives give insight into why a consumer did not receive the maximum score. FICO® Score 6 not only maintains the previous reason codes, but enhances the insights to lenders with four additional reason codes.

“The FICO® Score 6 is a game changer for credit understanding. By adding positive reason codes, we can give lenders more insight into how a borrower is managing credit, and this may be used to personalize engagement, sales, and credit education,” says Michelle Beetar, vice president, Africa and the Middle East at FICO.

FICO is one of a broad range of products offered by TransUnion to help lenders better assess risk and make more informed credit decisions. It will be available for businesses in South Africa, Namibia, Botswana, and Eswatini. More information about how organisations can benefit can be found at: transunion.co.za/product/fico-score-6