Strategic Thinking Exercise – Are the Tools for Evaluating Credit Risk Commensurate With the Environment?
August 5, 2021
2 minute read – A recent article by the Wall Street Journal, FICO Score’s Hold on the Credit Market is Slipping, raises many interesting questions surrounding the potential opportunities for a financial services industry that is perhaps less reliant on credit scores in the future.
We encourage teams to think strategically and explore the impact and future opportunities if FICO credit scores become a smaller factor in underwriting decisions. Below are some questions to help serve as a jump start to the thinking and dialogue.
- If there were no limitations, what would we ideally want to know about the customer and their creditworthiness?
- How could the current structure and emphasis on credit score result in missed lending opportunities?
- If lending opportunities are currently being missed, how can we correct course?
- What are other data points that can indicate a person’s creditworthiness that maybe weren’t available in the past, or better represent this new environment?
- What tools, systems, and resources do we have in place to incorporate our own internal data, and what needs to be outsourced?
- What other questions should we be asking?
With strategic thinking exercises, the key is creativity and dialogue. This is not about making decisions, but exploring a strategic topic in the environment or on the horizon. This can help you think about your institution’s direction and future business model.