Credit Evaluator FICO: "A Fairly Successful Bunch of Propeller Heads"

Fair, Isaac & Co. may be the most important enterprise you've never heard of. If you've ever applied for a mortgage or credit card, though, your name probably passed through its databases. The company "scores" consumers' credit 14 billion times a year, a business it so dominates that its acronym, FICO, is shorthand for credit evaluations.

At the core of Fair Isaac's service is its business intelligence software, which sorts through credit-card debts, mortgage information, and car payment history to determine a consumer's ability--and willingness--to pay back loans. Its customers are credit rating agencies, banks, and other consumer-oriented businesses. As applications for mortgages have soared and lenders have become edgier about risks, Fair Isaac's business has grown. For its fiscal year, which ends Sept. 30, analysts expect revenues will rise 12%, to about $350 million, while net income will climb 20%, to $55 million. "We're a bunch of propeller heads. But I think we're a fairly successful bunch of propeller heads," says CEO Thomas G. Grudnowski.

The company, a late bloomer that could well make future Info Tech 100 lists, was formed in 1956 in San Rafael, Calif., by engineer William Fair and mathematician Earl Isaac. Their idea was to apply math formulas to business forecasting. They started rating consumer's credit worthiness 15 years later.

The next big step: to do for fraud management what Fair Isaac has done for credit risk. On Apr. 29, Fair Isaac announced plans to pay $810 million for HNC Software Inc. (HNCS ), a San Diego maker of fraud-detection programs, which uses analysis of past behavior patterns to alert companies to new customers who are apt to rip them off.

Fair Isaac is reaching out directly to consumers, too. Last year, it launched a Web site,, that for $12.95 lets consumers see their own credit scores. People may not like what they see, but at least they won't be surprised if they apply for a loan and get bad news.

By Jim Kerstetter

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