For 37 years, the leading publication covering payment systems worldwide.

SEPTEMBER 2007 Issue 887

Posted with permission from The Nilson Report, Carpinteria, California.

scoring thin Credit files by a lender for a consumer’s credit report or

credit score, which are included in consumer
The three major credit bureaus – Equifax, Expe-
Thin File Industry Results, 2nd draft, September 12, 2007, 9:41 AM files even if the person has not yet established a
rian, and TransUnion — maintain records on 172
LLW changed > to <, changed the Adult Population heading to include tradeline. Full files by comparison average 13 to
million adults that contain enough data on file to
as of July 2007 and removed that footnote, changed Sub Prime to Sub- 14 tradelines that have been updated in the last
create
prime, changed a credit
Super Prime toscore using fiautomated
Superprime, systems.
xed typos in Likelihood six months.
and becomingThose adults represent 75% of the total adult
population in the U.S. There are another 24 mil- About 15% of all credit card applications are
lion adults about whom the credit bureaus have rejected by issuers, not because the consumer
no information at all. And falling between those has a history of bad credit, but for lack of enough
positive credit information or no information at
all. This has card issuers pressuring bureaus to
credit card scoring – u.s. develop methods for reaching these new pros-
FICO Market Adult Population Market Negative pects. Over the past two years, bureaus have
Score Segments as of July 2007 Saturation Risk* tested the predictive value of nontraditional data
Unscored No Records 24,000,000 <5% ? related to payment histories rather than credit
histories — data generated by checking accounts
Unscored Thin Files 33,000,000 <12% ?
or debit cards, utility bill payments, rent pay-
Unscored Subtotal 57,000,000 ments, rent-to-own accounts, payday loans, etc.
500-649 Subprime 61,000,000 55% 40% Sources of this data include ARC Systems, Austin
651-749 Prime 99,000,000 92% 7% Logistics, ChoicePoint, Credco, DataX, eBureau,
750-800+ Superprime 12,000,000 86% 2% eFunds, First Advantage, Innovis, and Teletrack.
Scored Subtotal 172,000,000 Out of the 24 million Americans with no credit
Bureau Files 202,000,000 files as many as half might qualify for credit.
These people include divorcees and widows
Adult Population 229,000,000
who relied on their husbands for credit, college
Note: This chart contains industry estimates and pooled results that vary
between bureaus, scorers, and databases. *Likelihood of becoming 90 students, people who rely exclusively on check-
days or more delinquent within the first two years. ing accounts, and foreign nationals who may or
©2007 The Nilson Report may not be living in the country legally. Foreign
nationals are also included in the half who would
not be likely to qualify, along with the unem-
categories are 33 million adults about whom
ployed, welfare recipients, the institutionalized,
the bureaus have files that contain insufficient
and recent bankrupts.
information for automated underwriting. These
people are said to have “thin” files. In terms of Efforts by risk management companies to gener-
credit risk, thin files range from unbanked sub- ate enough information to apply credit scoring
prime customers to the very wealthy superprime. technology to the 25% of U.S. adults with thin
or no files includes Fair Isaac’s Expansion Score
No common definition of a thin file is agreed
credit risk model, which searches databases
upon by the bureaus, but typically the term
holding 654 million payment records includ-
means a file with less than five current tradelines
ing checking accounts, membership clubs, cell
or credit events such as auto loans, credit cards,
phones, and utilities. The company claims it can
mortgages, student loans, personal loans, install-
generate credit scores for over 70% of the people
ment loans, as well as credit inquiries — requests
with thin or no files, and that typically 35% of

© HSN Consultants Inc. 2007 THE NILSON REPORT Reproducing or allowing reproduction or dissemination of any portion of this newsletter in any manner for
any purpose is a copyright violation subject to substantial fines. Yearly Subscription for 23 print and electronic issues is $1,295. ISSN 1087-8718
THE NILSON REPORT: 1110 Eugenia Place, Suite 100, Carpinteria, CA 93013 USA • PHONE (805) 684-8800 • FAX (805) 684-8825 • info@nilsonreport.com
 For 37 years, the leading publication covering payment systems worldwide.
Posted with permission from The Nilson Report, Carpinteria, California.
these receive scores between
640 and 850, representing a
range from the upper end of the
subprime credit market to the
superprime market.
CONTACTS
t Equifax John Carter is Sr. VP, Data
Acquisitions in Atlanta, Georgia, (404)
885-8300, john.carter@equifax.com.
t Experian Zaydoon Munir is Sr. VP,
Marketing in Costa Mesa, California, (714)
830-7849, zaydoon.munir@experian.com.
t Fair Isaac Lisa Nelson is VP, Global
Scoring in Minneapolis, Minnesota, (612)
758-5469, lisanelson@
fairisaac.com.
t LexisNexis Tom Brown is VP,
Financial Services Market in Boca Raton,
Florida, (561) 999-4422, thomas.brown@
lexisnexis.com.
t TransUnion Chet Wiermanski is
VP, Analytical and Decision Services
in Chicago, Illinois, (312) 466-7827,
cwierman@transunion.com.
Equifax’s MarketMax, developed
by LexisNexis, generates a risk
assessment score by applying
statistical techniques that draw
information from nontraditional
databases. MarketMax also iden-
tifies emerging credit customers
with thin or no files, paying par-
ticular attention to recent college
graduates and newly arrived im-
migrants. MarketMax can score
prospects for auto loans, general
purpose credit cards, retail credit
cards, and wireless telecom ac-
counts.
LexisNexis markets its own
© HSN Consultants Inc. 2007 THE NILSON REPORT Reproducing or allowing reproduction or dissemination of any portion of this newsletter in any manner for
any purpose is a copyright violation subject to substantial fines. Yearly Subscription for 23 print and electronic issues is $1,295. ISSN 1087-8718
THE NILSON REPORT: 1110 Eugenia Place, Suite 100, Carpinteria, CA 93013 USA • PHONE (805) 684-8800 • FAX (805) 684-8825 • info@nilsonreport.com
SEPTEMBER 2007 Issue 887
product called RiskView that lets sources including payday loans,
card issuers identify and predict rental payment histories, and
the risk of consumers with thin debit card data to help score un-
or no credit files based on 300 at- derserved consumers. Other data
tributes. RiskView uses databas- sources include utility bills and
es of public records to consider telecom payments, which Tran-
three factors: stability (based on sUnion has been collecting since
LexisNexis’s history of address the 1980s. Prior issues: 885, 883,
records), ability to repay (based 880, 873, 869, 868, 867, 865
on the prospect’s asset profile),
and willingness to repay (based
on an analysis of bankruptcy,
liens and judgments, criminal
history, and utility information).
Experian’s soon-to-be-released
emerging market risk model
combines traditional credit data
sources along with nontradition-
al sources it describes as “credit-
like.” The company claims that
its research has validated that
monthly payment data from util-
ity and energy companies, prop-
erty rental, retail payment, and
purchase data has the greatest
impact on scoring thin files. Ex-
perian finds that credit-like data
About 15% of
all credit card
applications
are rejected
due to a lack of
positive credit
information.
moves 10% of an analysis sample
from unscorable to scorable.
TransUnion’s L2C Thin File
Model uses nontraditional data