By Tom Quinn
By now, most people are aware of credit scores and have a basic understanding of how they work and buy into the concept that how you have managed your credit in the past is likely a good predictor of how you will manage credit in the future. The art and science of leveraging a consumer’s information to predict different types of behaviour is continually evolving as the amount of available information on people increases—and the technology to mine that data for predictive insights is enhanced.
If you think about it, how a person manages their credit provides a general indication of an overall level of responsibility that correlates to other behaviours in addition to credit risk. For example, studies consistently show that consumers with lower credit risk are also a lower insurance risk (less likely to file an auto insurance claim). As such, many insurance companies use a consumer’s credit history to help determine their insurance premium.
When growing up, your parents most likely ensured that you took your medicine as directed when you were sick to speed up recovery. How do doctors and other health care entities know if you, as an adult, are taking your medication like you’re supposed to—especially today, when the concept of the life-long “family doctor” with a deep relationship with his patients is rare?
Predictive models of course.
FICO, the same company that develops the FICO credit risk score, also creates other types of scores predicting non-credit related behaviours. For example, the FICO Medication Adherence Score identifies a patient’s propensity towards taking their medicine as directed in the future. Many people do not adhere to the doctor’s directions regarding taking their medication, or will often do so in the beginning, but become less diligent once they start to feel better. In fact, almost 3 of 4 people do not follow the directions for taking prescription drugs, according to various studies.
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The score does not consider credit bureau information (the use of which is governed by the Fair Credit Reporting Act), but does consider other information such as job history, home ownership, age, mobility, gender and the health problem being treated as examples. In general, a more stable profile (longer time at job and/or home) is more likely to be following the doctor’s orders. Younger people are more at risk of not adhering.
Health care professionals could use the score to help them more accurately identify those patients who need to be closely monitored or provided with a “friendly” reminder to take their medication as directed.
While a part of me feels this is a bit Orwellian, technology like this can enhance the lives of many people as long as it is used as intended and the consumer has access and insight into how their information is being leveraged. Who knows … perhaps we will be able to visit myFICO in the future to see our medical adherence score.
Tom Quinn is Credit.com’s Consumer Credit Expert. Tom shares invaluable insight to navigating the often complicated world of credit scoring, credit reporting and credit granting industry practices. Formerly with FICO (Fair Isaac), MDS (currently Experian) and Citibank, Tom has more than 20 years of behind the scenes experience in the credit industry and is currently Vice President of Scoring at Nomis Solutions.
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