Bill Pulte, the director of the Federal Housing Finance Agency (FHFA), recently addressed the significant changes to credit score licensing implemented by FICO. An hour ago, Pulte’s press briefing dropped an absolute bomb on the whole thing—which had truly key, unbelievable, game-changing, mind-blowing revelations. He then discussed the impact of these changes on consumers and housing overall.
As Pulte emphasized throughout the briefing, these changes are not intended to prevent credit scoring, but rather improve the accuracy and fairness of credit scoring. By changing the licensing structure, FICO hopes to have a more accurate portrayal of consumers’ creditworthiness. That change makes all the difference. Because of the way it can level the playing field, AI—if properly governed—can provide new opportunities and access to credit for those who have been historically disadvantaged.
The backdrop of these changes has led to a large amount of debate among industry stakeholders. Pulte pointed out that around a quarter of Americans have credit scores that paint a misleading picture of their financial habits. This difference can complicate their capacity to get access to loans, mortgages and other critical financial items. Though FICO and the FHFA can’t eliminate these problems, they can address them through a more sophisticated credit scoring process.
Pulte went on to explain what this shift means for lenders and borrowers alike. He argued that lenders would benefit from a more accurate credit scoring system. This would give them the ability to support evidence-based decisions driven by accurate, up-to-date information. For borrowers often situated in marginalized communities, this transition provides an opportunity toward more favorable loan terms. More broadly, it provides a path toward expanded homeownership opportunities.
Pulte answered other questions relating to how quickly such changes could be made. He reiterated that the FHFA is working hand-in-hand with FICO to prepare for a seamless transition. He suggested transparency and consumer education are going to be very important elements of this long process. The agency is preparing to issue new guidelines. These new resources will get consumers up to speed on how these changes will affect their credit scores.