What Is FICO?

FICO is a major data analytics software company that provides products and services to both businesses and consumers. Previously known as the Fair Isaac Corporation, the company changed its brand name to FICO in 2009 and is best known for producing the most widely used consumer credit scores that financial institutions rely on to decide whether to lend money or issue credit.

As of 2021, FICO has offices in 45 locations worldwide, mainly in the United States, Europe, and Asia, and its clients include hundreds of banks, insurance companies, and retailers. FICO also provides services for debt collections and recovery, customer strategy, fraud protection and compliance, and a variety of other services to businesses.


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FICO Explained

Fair Isaac was founded in 1956 by engineer Bill Fair and mathematician Earl Isaac. In 2020, the company held 200 patents (184 U.S. and 16 foreign) for its technologies, with another 102 pending. Ninety-five percent of the largest U.S. financial institutions are FICO clients, and the company has sold more than 100 billion credit scores since its inception. The company also asserts that three-quarters of all home loan originations make use of the information provided by its scores and reports. FICO also maintains a fraud protection service used to safeguard more than 2.5 billion credit cards.

Because FICO gives businesses a convenient way to assess consumers’ credit risk through FICO credit scoring, consumers have greater access to credit. Consumers can access their credit scores directly through myFICO, the company’s consumer division. The sale of credit scores to both businesses and individuals is an important part of the company’s business model.

How FICO’s Services Are Used to Assess Credit Risk

FICO’s scoring algorithms are designed to predict consumer behavior. For example, when FICO gives a consumer a credit score of 600, which is considered subprime, it is predicting that the customer is likely to have trouble repaying a loan based on the data it has on that consumer’s past repayment activity. Many companies rely on FICO’s products and services to reduce risk.

The FICO score is so widely used and there is so little competition in the credit scoring industry that if the company becomes unable to provide credit scores, or if its scoring method were found to be significantly flawed, then there could be negative effects throughout the economy. Most mortgage lenders, for example, use the FICO score, so any problem with FICO or its scoring model would have a major impact on the mortgage industry.

As consumer behavior and usage of credit change, there has been some debate on how new and future lenders might use FICO’s services. For example, there has been some perception that recent generations are aiming to use credit cards less than older generations. Furthermore, there may be other types of financial indicators that lenders may use to assess potential borrowers.

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  7. MyFICO. “What’s the Difference Between FICO Scores and Non-FICO Credit Scores?” Accessed Dec. 22, 2020.

  8. Consumer Financial Protection Bureau. “Borrower Risk Profiles.” Accessed Dec. 22, 2020.