Credit scoring has long been a foundational part of mortgage lending, helping lenders evaluate borrower risk, make informed decisions, and determine appropriate loan terms. As the industry moves toward modernized scoring models, understanding the differences between traditional FICO scores and newer innovations is becoming increasingly important.
In this episode of The Birchwood Beat, Samantha Markwood of Birchwood Credit Services welcomes Jiren Murphy from FICO to discuss the future of mortgage credit scoring, the advantages of FICO® Score 10T, and emerging technologies that could reshape how lenders evaluate borrowers.
From the use of trended credit data to innovations involving consumer-permissioned cash flow information, Jiren shares insights into how FICO is approaching the next generation of credit risk assessment.
For decades, Classic FICO scores have played a central role in the mortgage industry, supporting credit risk evaluation throughout loan origination, servicing, and secondary-market processes.
FICO Score 10T builds on the core purpose of traditional FICO scoring: helping lenders assess the likelihood that a borrower may default on future credit obligations.
However, one of the most significant differences is how the newer model evaluates credit behavior.
The "T" in FICO Score 10T stands for trended data.
Rather than relying primarily on a snapshot of a consumer's credit profile at a particular moment, FICO Score 10T evaluates credit behavior over a 24-month period.
This additional historical context can help lenders understand patterns such as:
During the podcast, Jiren describes the difference as moving from a static picture of a borrower to a more complete view of their credit behavior over time.
For mortgage lenders, this additional information may support a more detailed assessment of credit risk.
One of the primary themes throughout the episode is the importance of predictive accuracy in mortgage lending.
Credit scores help lenders evaluate the likelihood of future default, and the effectiveness of that evaluation can influence decisions throughout the mortgage lifecycle.
Jiren explained that FICO Score 10T was developed to improve risk assessment by incorporating additional credit behavior information.
According to the performance findings discussed by FICO during the episode, the model has demonstrated potential benefits in certain analyses, including:
These are performance findings described by FICO, not guaranteed results for every lender or borrower population. The episode does not identify the complete study methodology, comparison populations, or measurement periods behind these figures.
For mortgage professionals, the important consideration is how a model performs across their own portfolios and lending programs.
Expanding responsible access to homeownership was another major focus of the conversation.
Jiren discussed how newer scoring approaches may help lenders identify qualified borrowers who could be evaluated differently under traditional credit scoring models.
By incorporating additional information about credit behavior, FICO Score 10T may provide more insight into certain borrower profiles.
The model can also consider rental payment information when that data is available and applicable.
For first-time homebuyers, these capabilities may be particularly relevant because some applicants have limited traditional credit histories.
However, additional scoring information does not automatically translate into mortgage eligibility.
Lenders must continue evaluating income, debt obligations, assets, credit history, applicable underwriting guidelines, and other relevant factors.
The opportunity lies in helping lenders make informed decisions using a broader understanding of borrower creditworthiness.
One of the clearest recommendations from Jiren was that lenders should begin evaluating FICO Score 10T data rather than waiting until implementation changes affect their operations.
During the podcast, Jiren discussed FICO's free-access testing initiative, which was designed to allow participating lenders to obtain FICO Score 10T alongside Classic FICO scores.
He noted that more than 80 lenders had enrolled in the program at the time of the conversation.
The purpose of this testing is to help organizations understand how newer scoring models may affect their specific borrower populations and lending workflows.
Borrower score differences
Compare how FICO Score 10T and Classic FICO evaluate borrowers across different credit profiles.
Potential approval opportunities
Identify borrower segments that may experience changes in scoring outcomes and evaluate how those changes interact with underwriting requirements.
Loan pricing implications
Examine how scoring differences may affect applicable pricing considerations.
Portfolio-level risk
Evaluate model performance using historical loan data and relevant risk measures.
Operational readiness
Review whether existing systems, workflows, and teams are prepared to accommodate newer scoring models.
Jiren emphasized that lenders should move beyond general awareness and begin conducting their own analyses.
Testing program availability, eligibility, and pricing should be confirmed directly with Birchwood or FICO, as these offerings may change.
Another important topic addressed during the conversation was the misconception that credit scores generated by different models are directly interchangeable.
Jiren explained that while different scoring models may use similar numerical ranges, they can evaluate credit risk differently.
For example, a 700 FICO score and a 700 VantageScore 4.0 do not necessarily represent identical probabilities of default.
Different models may use distinct methodologies, data attributes, development populations, and risk calculations.
When evaluating different scoring models, lenders should consider more than the numerical score.
Important considerations include:
The key takeaway: Mortgage lenders should evaluate the risk represented by a credit score rather than assuming scores from different models have identical meanings.
This becomes especially important as the industry continues exploring modernized credit scoring approaches.
Credit scores influence more than the initial mortgage application.
During the episode, Jiren discussed how Classic FICO scores have historically supported decisions across multiple stages of the mortgage ecosystem.
These include:
As newer scoring models are evaluated, lenders and other mortgage industry participants must consider how changes could affect these interconnected processes.
A successful transition requires more than updating a credit score field within a loan origination system.
Organizations may also need to review risk policies, operational procedures, data integrations, and investor requirements.
Understanding the broader mortgage lifecycle can help lenders prepare for these changes more effectively.
Beyond FICO Score 10T, Jiren highlighted another emerging development: the use of consumer-permissioned cash flow data in credit scoring.
He discussed UltraFICO, a scoring approach designed to incorporate additional financial information alongside traditional credit data.
Consumer-permissioned cash flow data refers to financial account information that a consumer authorizes a provider or lender to access.
This may include information from:
Jiren explained that financial account data can provide additional insight into how consumers manage their money.
For example, a consumer's traditional credit history may not fully reflect recent improvements in their financial behavior.
Additional cash flow information could potentially help lenders better understand that consumer's current financial circumstances.
During the conversation, Jiren discussed FICO's work with Plaid to help facilitate access to consumer-permissioned financial account information.
This type of integration can support the use of cash flow information in certain credit evaluation applications.
However, UltraFICO and related cash flow-based scoring capabilities should not be assumed to be approved for every mortgage product or underwriting program.
Lenders should confirm the applicable use cases, requirements, and product availability before considering implementation.
Throughout the episode, Jiren emphasized FICO's focus on developing scoring tools that support informed lending decisions and broader access to credit.
As the mortgage industry evolves, several themes are becoming increasingly important.
Trended credit data can provide additional context about how borrowers manage credit over time.
Consumer-permissioned financial information may create new opportunities to evaluate certain borrower populations.
Modernized scoring models are designed to improve the information available to lenders when assessing creditworthiness.
Lenders will need to understand how different models perform across their specific portfolios and lending programs.
Credit reporting providers, scoring companies, lenders, and other mortgage industry participants all play important roles in helping organizations navigate changes.
The conversation between Samantha Markwood and Jiren Murphy highlights several important considerations for lenders preparing for the next generation of mortgage credit scoring.
As the mortgage industry continues to evaluate new credit scoring models and technologies, preparation and education remain essential.
At Birchwood Credit Services, we're committed to helping mortgage professionals navigate industry developments and better understand the information available to support their lending operations.
Whether you're evaluating FICO Score 10T, comparing credit scoring models, or exploring new credit reporting capabilities, our team is here to help.
Have questions about FICO scores or preparing your lending operations for credit scoring modernization?
Contact Birchwood Credit Services
The Birchwood Beat features conversations with industry experts about the trends, technologies, and developments shaping the future of mortgage lending and credit reporting.