Credit agencies generate credit scores to help lenders and creditors determine creditworthiness and support responsible lending. In the fourth quarter of 2020, Equifax launched a new credit scoring model called Equifax One Score into the Australian market to improve their existing model.
Equifax’s purpose in developing the new credit score was to provide lenders with a strong performing score that captures recent shifts in Australia’s data reporting and consumer credit behaviours. Equifax One Score supports highly predictive, stable, explainable credit decisions. It is the most predictive score that Equifax has ever developed.
Equifax One Score taps deeply into a rich collection of information, including 24 months of CCR data and a full five years of negative enquiries and defaults. Trends driven from negative data are highly effective at helping predict risk, which explains why Equifax One Score remains so predictive despite the impacts of deferrals and hardship driven by COVID-19.
Equifax One Score uses new data not leveraged in previous credit scores. The use of regulatory compliant alternative data helps to bolster the predictiveness of Equifax One Score with individuals who are marginal or new-to-market. Supplementing the score with geodemographic and BNPL data adds another layer to the existing indicators of creditworthiness.
Equifax One Score balances speed and accuracy with transparency and explainability using unique machine learning technology. Equifax has the US patent for a new machine learning technique called NeuroDecisionTM Technology (NDT), which is used to reach wider and deeper into data to look at multiple interactions with many variables. It does so with accuracy and transparency, generating logical and actionable explanations (reason codes) for what is driving a consumer’s score.
Equifax One Score will give lenders and consumers a common score for the first time. Reduced dependence on the current (or incoming) enquiry in Equifax One Score has removed the disjoint between consumer and lender scores. Lenders carrying out pre-approvals before conducting a bureau check can be confident that they will be using the same score when the applicant applies for a loan. For lenders taking a risk-based approach to pricing, Equifax One Score offers greater consistency and reliability – enabling lenders to raise their volume of good loans and take advantage of growth opportunities in a disrupted and competitive marketplace.
The consistency of a standard score is an important step closer to improved financial literacy. As consumers begin to understand that Equifax One Score is a dependable assessment of their creditworthiness, they will increasingly learn to leverage the value of data to negotiate on credit rates and terms. Within this transparent and effective ecosystem, lenders can personalise their engagement with customers, innovate on behalf of the consumer, and drive decisions for profitable portfolio growth.