John Shegerian: This edition of the Impact podcast is brought to you by ERI. ERI has a mission to protect people, the planet, and your privacy and is the largest fully integrated IT and Electronics Asset Disposition provider and cybersecurity-focused hardware destruction company in the United States and maybe even the world. For more information on how ERI can help your business properly dispose of outdated electronic hardware devices, please visit eridirect.com.

John: Welcome to another edition of the Impact podcast. I’m John Shegerian, and I’m so honored to have with us today Sally Taylor. She’s the vice president and general manager of FICO Scores. Welcome to the Impact podcast, Sally.

Sally Taylor: Thank you for having me, John.

John: It’s an honor. And, Sally, before we get talking about this very, very important work you’re doing at FICO, can you please talk a little bit about you? How do you even get here? This is a big job but… that makes a huge impact with millions of people across our great country. How did you even get here and where you grow up and what was your journey like?

Sally: Sure. My dad was in the Air Force and my mother is Japanese, and I grew up mostly in Japan. I didn’t really move to the States until I was 12, and then we moved to Southern California. And then I came to college up in Berkeley in Northern California. I was a Math geek. So, that’s really how I got into it.

John: Wow.

Sally: I loved Math and the Sciences. And when I got my degree, I found this company called Fair Isaac. We now call ourselves FICO, but I’ve been at this company for over 35 years and really it’s… I felt that I’ve[?] very much connected with the academic atmosphere and just the fact that we were a lot of Math nerds that believe that businesses can do a better job making decisions if they use Math.

John: Well, that’s interesting. So when you started… I’m old enough as I shared off the air how old I am, I’m 59, I’m going to be 60 soon so I remember Fair Isaac. What did you come in as? What was your entry-level position?

Sally: It was as a data scientist except we didn’t call ourselves that at the time. My title was programmer analyst, so basically running a lot of statistical programs and working on projects with clients that were banks in building customs credit scoring models for them.

John: Right. And so when did the transition happen from Fair Isaac to FICO? Because I don’t remember that myself but…

Sally: Right. Well, so interestingly enough, our formal name is still Fair Isaac. So, FICO was the nickname for Fair Isaac. Even when I started, I was told the industry calls us FICO, it stood for Fair, Isaac Companies.

John: Got it.

Sally: It’s just a nickname. And then it was because of the FICO Scores that got introduced available at all three credit bureaus around the late 80s is when the FICO Scores got introduced. And just over time, they all have their own product names through the credit bureaus, but everyone just refer to them as the FICO Scores in the whole industry.

John: That’s right.

Sally: And then eventually, an enterprising chief marketing officer at our company says we’re just going to brand the whole company FICO.

John: Got it. And for those listeners and viewers who are interested in finding Sally and her great colleagues and FICO, you could go to myfico.com, myfico, F-I-C-O, .com. Or we’re going to also talk about later in the show scoreabetterfuture.com and we’re going to talk about how and why that was created and what you’re doing there. Before we get going about FICO per se, let’s talk about the problem because it’s not a problem that’s… The media, of course, wants to cover all the biggest things that they could… they can make a lot of hay about. But insidiously, the problem of financial literacy is truly… An illiteracy is a big, big problem in America. How big is the problem that you’re solving? How big of a gap do we have between those who really know what to do and how to handle their finances and those who don’t?

Sally: Yeah, now that’s a great question. I think we are really looking at the problem from a few different angles. There is the financial literacy and just understanding how to manage your finances properly. And then there’s information just about how credit works. How do FICO Scores work? How do lenders use it? And then there’s the issue around what it takes for a consumer to get a FICO Score. So, FICO Scores as I said were introduced in the late 80s and they actually just look at the information that’s on a traditional credit report. And the reason for that is not because that’s all that matters. Usually, a lender, when they make an underwriting decision, will ask other information on an application and use other types of data. But the FICO Score comes along with a credit report because that just makes it really accessible and makes it very accessible not just to lenders of all types but to consumers themselves because it rides along with that traditional credit report.

John: Right.

Sally: So, what happened though, as all… the lender started really using this very powerful tool, the FICO Score that comes along on the credit report, is that you have to have credit to have a credit report. And this is an age-old problem with credit. It was even a problem when I started at FICO. And even when I was a child, my father had a hard time getting credit because how do you demonstrate to a lender that you can handle your credit if you haven’t had credit yet? So, this on-ramp to credit has always been an issue and getting that first FICO Score is… can be difficult for somebody who’s young or an immigrant. So, we consider that problem the financial inclusion problem because how do you get that first line of credit and how do you assess a consumer’s credit risk when they haven’t had credit yet? So, those are all the three ways that we’ve really focused on the problem. There’s the literacy, there’s the understanding about credit and credit scores and how it works, and then there’s how do we help consumers get that first… their first FICO Score.

John: Catch-22.

Sally: Right.

John: It’s a Catch-22. So, now you’ve had a journey at FICO yourself 35 or so years, but the fascinating part is during your journey, technologies had a journey. We’ve had a technological revolution concurrent with your career. So, share a little bit about how… what you’re doing in FICO, but how that’s been impacted by also the technological revolution in terms of delivering the information and solving those three problems that you just shared.

Sally: Yeah. No, that’s been really a fascinating part of my career because 35 years ago, we didn’t have the sort of digitized data that we have today. So, we were building credit scorecards and I literally went on one project where we went to file cabinets and pulled out paper applications and data entry used to enter them in in order to build the scorecard. That was before everything was automated like it is today.

John: Right.

Sally: And when it comes to, say, the data that’s on a credit bureau report, I’ll give you a sense of how it’s changed. Back in those days when there were manual underwriters evaluating, you would fill out an application for credit and it would say what your occupation is and your income. And maybe you would bring bank payment stubs on paper to your underwriter and then they pull a credit report, and the underwriter would look at it as a human looking at it.

John: Right.

Sally: And even though there’s a lot of rich data on there, they’re just looking at a few things like what was the worst level of delinquency and how many lines of credit do you have? It had to be really simple for human to be able to do it. Well, now, all of that is digitized data and what that’s done… So, that was a huge transformation of FICO Score coming along on a credit report because now, all that rich data is just annualized… analyzed by a computer.

John: Right.

Sally: And so you can look at much greater depth than look at comparisons and ratios and this and that and it’s all done, and it comes along as a three-digit number along with the credit report. So, it’s been very transformational and what it means is that now there’s a lot of rich analysis. And lenders today and their custom models look at even more data, so a lot of analysis. And they understand their customer segments very finely. There’s a lot of rich history of data science in the field of lending.

John: Sally, I know you’re a humble human being, but you’re known to be not only a data specialist, you’re really a predictive analytics specialist. So, historically, when I was growing up, the folks that were smart like you were called nerds, but nerds have become the cool people now. So, I assume it’s been a really fun journey to be a predictive analytics and data scientist during this transformational period of where technology and data analytics have taken on a whole new meaning these last 35 years.

Sally: That’s right, and applied in so many areas which is really fascinating.

John: With regards to FICO, let’s talk about two out of the three problems that you brought up a couple of minutes ago. So, one question, how does FICO specifically help people that have no credit history start their credit journey? That whole Catch-22, how does that happen?

Sally: Yeah. So, we’ve done a lot of innovations not just in the US but internationally, I’d say in the last 10 years. And the key to financial inclusion in the scoring itself is alternative data. So, data that’s outside of the traditional credit report and data that you don’t necessarily have to… have had credit for. So, there are two products in the US that we have available for lenders who want to lend outside of that, those who have that traditional data, one is the FICO Score XD and it looks at what’s called specialty credit bureaus. So, we offer that with our partners Equifax and LexisNexis and it looks at not just any data that might be at Equifax but it looks at the NCTUE database, which is a collective of how people pay their telco and utility type bills. So, it’s just a specialty database there because that information is not on a traditional credit report.

John: Report…

Sally: And then with LexisNexis looking at property type of… public record type of information. So, it’s tapping other types of information than what’s on a traditional credit report. So, the XD Score allows us to score quite a few of the people that don’t get a FICO score. And then the second product that we launched a couple of years ago is called the UltraFICO score. This uses a new technology that allows people to share information from their financial accounts. Imagine that you apply to credit with a lender and the lender is using the UltraFICO Score in your interaction, like on the website it’ll say, do you want to enter in your checking and savings account information? And it pops up a screen where you can enter it in like you’re logging into your account online, you put in your credentials, and then it pulls from your online checking and savings account from your bank, banks that you bank with, that information. So it looks at… In addition to any credit, it looks at how you’re managing your finances through your checking and savings account. Are you saving money? What kind of cash loan do you have? And so forth. So, these are examples of what we call alternative data, so information that’s outside of the credit report that gives the consumer more ways of showing how they’re managing their finances.

John: That’s fascinating because I assume this becomes even more relevant and important as the last 15 years we’ve had the rise of the side hustle economy, where people are Uber drivers or DoorDashers or all sorts of other side hustles that typically didn’t get, don’t get reported as much or get accounted for as much. This is a way for you to account for them and to help them to build FICO credit score.

Sally: That’s right.

John: That’s so fascinating. Let’s go back one step further, the issue of illiteracy, financial literacy. Folks like you or me or other of our friends and relatives are blessed to have great educations and it’s almost something that gets to be taken for granted once you have it. But if you don’t, it’s a huge gap to not have the right financial literacy or education. What is FICO doing to help in the literacy and education space, to help make a bigger tent[?] to be more inclusive and bring more people in? So we create a more democratized society with regards to financial literacy and education.

Sally: Yeah, so we’ve got a couple of programs and I think the one that really hits the spot at what you’re talking about is the Score A Better Future program. So, the Score A Better Future, it’s a free workshop. We make them available, we used to make them available regionally, but now after the pandemic, we’re doing them virtually. [crosstalk] So, it’s a free workshop. People learn about their FICO scores from FICO expert as well as how to build credit, and then they get their own FICO Score. And there are credit counselors that can work with them one-on-one so they can set goals for themselves, learn what are the kind of practices and behaviors that help long-term building of credit. So, those have been great because people come to that very much wanting to have a goal, like wanting to buy a house someday or buy a car. And it helps them to establish those goals and what do they need to do to build that up and manage their credit, so that it’s looked at in the most appropriate way.

John: So, let’s give that a shoutout. People could go to scoreabetterfuture.com. And then how often are these held? How often are these events held?

Sally: Yeah, they’re held about once a quarter, yeah.

John: It’s great. That is great. That’s great. For those who just joined us, we’ve got Sally Taylor. She’s the vice president and general manager of FICO Scores. You could find Sally and her colleagues at myfico.com. Sally, I didn’t realize this. Again, a little bit comes from sort of the American feeling of superiority or something of that nature of all of our brands of the greatest brands, but FICO is no… is not just an American brand. As you said, it’s an international brand. How many countries is FICO in? And how does that create more challenges but make also what you do more interesting?

Sally: Yeah. So, the FICO Score is available in about 30 countries. Because we ran a little campaign recently, 30 years and 30 countries because our first country outside the US was Canada, and that happened shortly after we launched FICO Scores in the US. And another one shortly after that was South Africa. And then we’re actually relaunching the latest version of the scores in South Africa this next month. So, the challenges, it’s… The financial inclusion challenge that we were talking about in some countries has even another layer to it. Because the US is a very developed credit country.

John: Okay.

Sally: And so at least, the vast majority of people do eventually… That on-ramp is not always easy but they do eventually become credit consumers. There are other countries that are more developing countries where there are many, many people, even a majority of people that don’t have credit and even many people that are unbanked entirely. So, meaning they don’t have like a checking account where they go and put their money. They transact in other ways. And interestingly enough, some of them are almost kind of skipping over and using things like mobile payments before they use like traditional banking. So, for example, we partnered with Vodafone in Africa because they offer mobile payments, something called M-PESA, where in African countries, that’s the way they give money to each other digitally. So that’s their next step beyond Catch. It isn’t going to traditional banks, but it’s transacting. It’s almost like doing the Venmo-type thing, right?

John: Right.

Sally: But that’s the way they commonly transact. And lenders are starting to get into lending money through those sort of channels. So, that really gave us a completely different type of data to look at. Now, we’re looking at these mobile transactions instead of like a traditional credit report. In different countries, we look at different sources of data and it makes it very interesting, but it’s also the dynamics. In some countries, credit just isn’t as big as it is in the US. But other technologies like mobile banking or open banking, which is what we were chatting about, how you can put in your credentials for your checking account, pulls that data, might be more of the thing rather than the traditional [inaudible] [crosstalk]…

John: Right.

Sally: …in those other countries.

John: Earlier, you spoke about some of your innovations, your alternative data methodology, etc. What other innovations are you working on that you could share with our listeners and our audience since technology and predictive analytics and data science is always evolving and actually seems to be evolving very quickly? And Moore’s Law has actually been turned on its head. Where are we going with regards to FICO and the innovations you’re working on to help us in the future?

Sally: Yeah. Well, so the whole area of alternative data can be very, very deep, right?

John: Yeah[?].

Sally: We’ve worked with partners that helped with even like psychometric data where you essentially take a test that almost gets into the psychology of how you think about money to… So, when you’re going into populations that are completely unbanked or you don’t have the digital infrastructure necessarily to gather information, then these other types of methods start to become really interesting. We also partnered with a company where they had a technology where with the consumer’s permission, they’ll interrogate like the information on your phone. And, say, just based on how you use your phone, we’re going to be able to detect a little bit what kind of risk you might be. So, really creative interesting things especially when you don’t have the kind of infrastructure of finance and banking as you have in the US. So, that’s been a lot of the interesting thing. And then I think another angle of areas that are really interesting is more and more working on helping the consumer see their score. So, scoring first and foremost is for lenders, is for lenders to help decide how to evaluate the consumer. We started off as very much of a B2B sort of solution but it was in 2000 that FICO started myfico.com which was now consumers… We’re starting to know about their FICO Score. They were hearing it from their mortgage brokers or they were going to buy a car and the auto dealer was saying, do you know what your FICO Score is? So, more and more consumers started finding out about their scores and that prompted us to start myfico.com. And that’s a whole area of innovation as well, because how can you be helpful to the consumer? If you go to myfico.com, there are, for example, simulators where you can say, “Well, what if I want to get a mortgage in two years and my score today is here, and my goal is for it to be here? What do I have to do to get that?” And there are these tools and simulators out there that help the consumers manage their credit that way. So, those are a few different areas of innovation.

John: I always like, Sally, to give takeaways that for our listeners and viewers that they could use, that are actionable. And I have course for my friends and relatives that have higher FICO scores. I have a FICO EMV. So, I want to know from you, I want to overcome my FICO EMV. I want to understand how do people… What’s the most actionable steps as good law-abiding citizens can take to get their FICO Score up? Tell us some real good tips coming right from one of the leaders of FICO.

Sally: Okay. So, the two big ones, the two most important things, pay your bills on time and don’t take more credit than you need. If you follow those two golden rules, you’ll be just fine.

John: How about credit cards that go unused? Like credit cards that I have historically, but I’m not really spending all money[?] anymore. Do I cancel them or do I just keep them and leave them?

Sally: All right.

John: Come on. Give me a couple more.

Sally: This is where I recommend that you would go and get a simulator because I’m going to give you the answer that in my career at FICO I have to give the most often.

John: Okay.

Sally: It depends. That tip[?], that’s the truth of it.

John: I believe you.

Sally: It depends on what’s in your credit file. Do you have a lot of credit? Do you have this… It depends on what model’s being used. It depends on so many things. It’s not generic like that. It’s very depends on where you are. And so that’s why these simulators are really, really helpful because it takes what your score is and what your data is, and then you can say from there, what can I do? And they’re very helpful. They do give you some good tips but it’s very specific to you.

John: One last question here. This is, yeah, you’re going to break the code of my family here because there’s my wife and she’s always looking over my shoulder. So, we have on[?] competition, we have a question in our household. If I do something that’s not good, does that affect her FICO Score or vice versa? Does your behavior affect your spouse’s FICO Score if… negatively or positively?

Sally: Yes. So, it depends. But here’s what it depends on. I’ll be more specific on this.

John: Okay.

Sally: So, with every, like… Let’s say you have a credit card.

John: Yeah.

Sally: It’s either joint or it’s yours and you have an authorized user.

John: Right.

Sally: If it’s joint or either you’re the authorized user of your spouse’s or vice versa, then it’s on both of your credit reports. But if you have a card that does not have your spouse’s name on it, she’s not an authorized user, then it’s only on yours.

John: Got it.

Sally: Okay? So, that’s how you tell. And then if it’s on both of yours, it’s the same information, it doesn’t matter who spent the money.

John: Right. Wow. Well, you’ve answered a lot of the great or very important questions because like I said, FICO EMV’s a big deal in my household especially with me and my wife. Sally, this has been great and this is… The issue of financial literacy is so important. I’m so grateful for the important impact that FICO’s making in this space. And for our listeners and viewers out there, to learn more and also to improve your FICO Score and to do the predictive analytics that Sally was talking about earlier, go to myfico.com. Also, this fall will be the next seminar. And the Zoom call that Sally was talking about in terms of getting better scores, please go to scoreabetterfuture.com, scoreabetterfuture.com. Sally Taylor, you’re making an important impact on this world, so is FICO. Thank you for all that you’re doing and thank you for being a guest on the Impact podcast.

Sally: Thank you, John.

John: This episode of the Impact podcast is brought to you by Closed Loop Partners. Closed Loop Partners is a leading circular economy investor in the United States with an extensive network of Fortune 500 corporate investors, family offices, institutional investors, industry experts, and impact partners. Closed Loop’s platform spans the arc of capital from venture capital to private equity, bridging gaps and fostering synergies to scale the circular economy. To find Closed Loop Partners, please go to www.closedlooppatners.com.