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To satisfy credit card issuer's voracious appetites for information about their customers and consumers at large, the big credit bureaus are cooking up a smorgasbord of new products and services for assessing risk and expanding markets.
The credit report, the long-time tool of creditors, has spawned a sister industry full of new tools that serve up consumer buying data in a myriad of ways. Driven by the demand of credit card issuers and other creditors fighting for share in an increasingly competitive market, the credit-reporting agencies also are being spurred by growing competition among themselves.
The Big 3 bureaus are each expanding their menus of products and services, and alliances and acquisitions have become common. At the same time, First Data Corp. also is packaging its processing and information resources in ways that are competing with the bureaus. Indeed, it's becoming tough to sort through the new menus to figure out which bureau, if any, is in the lead with cutting-edge offerings. While an alliance between Fair, Isaac & Co. and Chicago-based Trans Union Corp. has caught a lot of attention for a new co-developed Horizon bankruptcy-scoring tool, Fair, Isaac also expects to roll out similar new tools with the other two major bureaus, Orange, Calif.-based Experian Inc. and Equifax Inc., Atlanta.
"We'd like to offer something across the board similar to Horizon in design," says Careen Foster, product manager for North American Credit Bureau Services at Fair, Isaac, which is based in San Rafael, Calif. She adds that products developed with each bureau will differ, however, since Fair, Isaac will focus on the strengths of each of its partners when developing a new scoring model.
In developing Trans Union's Horizon product, the two companies sought a new way to attack the bankruptcy issue that would maximize a creditor's returns. Using Trans Union's credit data with Fair, Isaac's analysis and scoring mechanisms, Horizon focuses its bankruptcy predictions on consumer behavior six to 18 months before debtors actually file for bankruptcy protection, allowing creditors more time to take loss-limiting actions, and it scores consumers to relate the size of potential bankruptcy losses to expected future revenue. "We spent a couple of years to understand what the problem was," Foster says. "We focused on bankruptcy losses and took into account the amount of revenue coming in from individual accounts."
Repackaging Information
By focusing on each account's revenue flow, she adds, a card issuer can better decide if taking action to close an account will cause more harm than good by cutting off future revenue. "It looks at consumers that had a lot of debt but didn't go bankrupt, so it limits the impact of giving up too many 'good-revenue' account holders," says Tony Powers, the Horizon product manager in the Acquisition and Risk Management Group at Trans Union.
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