Why has FICO's FICO® Score experienced a 15% drop in adoption rates among lenders over the past quarter?

Introduction

The recent 15% drop in FICO® Score adoption rates among lenders is a concerning trend that requires immediate attention. To address this issue, I'll employ a systematic approach to identify, validate, and resolve the root cause while considering both short-term and long-term implications for FICO's product strategy.

Step 1

Clarifying Questions (3 minutes)

• Looking at the timing, I'm thinking there might be a seasonal component. Has this 15% drop been compared to the same quarter last year?

Why it matters: Seasonal fluctuations could explain the drop without indicating a larger problem. Expected answer: Yes, this drop is unusual compared to historical data. Impact on approach: If seasonal, we'd focus on year-over-year trends rather than quarter-over-quarter.

• Considering the specificity of the drop, I'm wondering about recent changes. Have there been any significant updates to the FICO® Score model or pricing in the last quarter?

Why it matters: Recent changes could directly impact adoption rates. Expected answer: No major changes to the core model, but there was a pricing adjustment. Impact on approach: If pricing-related, we'd analyze price elasticity and competitor pricing.

• Given the focus on lenders, I'm curious about market segmentation. Is this drop consistent across all types of lenders, or is it more pronounced in specific segments?

Why it matters: Identifying affected segments helps narrow down potential causes. Expected answer: The drop is more significant among smaller, regional lenders. Impact on approach: We'd focus on understanding the unique needs and challenges of this segment.

• Thinking about external factors, I'm considering regulatory changes. Have there been any recent regulatory updates affecting credit scoring or lending practices?

Why it matters: Regulatory changes can significantly impact lender behavior. Expected answer: There have been discussions about potential changes, but nothing implemented yet. Impact on approach: We'd need to assess how anticipation of regulatory changes might be affecting lender decisions.