The Super Bowl of Credit Scores

 

Super Bowl XLVII is almost here! As the much anticipated Harbaugh-bowl approaches, there’s non-stop talk and big  predictions about who will win and the final score.

 

Will it be the Baltimore Ravens or the San Francisco 49ers?

 

We all have to wait for the game itself to know for sure, but experts have used lots of statistical models to predict who will win and even to forecast the spread of the final score.  Some approaches are unorthodox to say the least; a camel named Princess in a New Jersey zoo reportedly has an uncanny ability to predict the winning team correctly, using graham crackers as her medium.

 

Other approaches are more traditional and data driven, an approach we appreciate at FICO. Most use mathematics to evaluate hundreds of historical data elements (such as player stats and come-from-behind victories) to predict the winner.

 

While the predictive focus is different, that data-driven approach is similar to the way FICO scores are created.  To build our formula we analyze hundreds of factors related to credit history, from millions of depersonalized credit reports.  The resulting number tells lenders the likelihood that a person will pay back credit as agreed.

 

So who would win in the “Super Bowl of Credit Scores” between Baltimore and San Francisco?

 

For fun, we calculated the FICO scores for the greater Baltimore area and San Francisco Bay Area* based on a recent random sample of credit records.  Baltimore got a median score of 717. San Francisco netted a median score of 737. (A median is a number dividing the higher half of a sample from the lower half.)

 

While both cities have median FICO scores that many lenders would consider to be acceptable risk, the folks in San Francisco beat out Baltimore by 20 points.

 

Does 20 points matter?

 

It certainly does in a Super Bowl and definitely can in the credit world as well. Based on lender rates, if those two regions were people shopping for car loans, San Francisco would likely be offered a lower interest rate (3.446%) than Baltimore (4.891%) on a 36 month auto loan. Which means San Francisco would pay $576 less over the life of a $25,000 auto loan.

 

Now, I am unaware of any proven correlation between a city’s median credit score and the likelihood of its team winning the Super Bowl.  As if to prove the point, the New England Patriots lost to Baltimore in this year’s AFC Championship game, even though the median FICO Score for the Boston area is 743 — 26 points higher! It’s what takes place on the field on game day that determines the Super Bowl winner.

 

May the best team (and Harbaugh) win.

 

*We used MSA (Metropolitan Statistical Area) classifications to select the records used in calculating median FICO Scores.

 

Tom Quinn is the Vice President of Business Development for myFICO, and has over 20 years of experience working with consumers, regulators and lenders and regarding credit related questions and initiatives. 

 

 

 

 

 

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