What is the primary function of FICO?

The primary function of FICO is to use predictive models to predetermine credit risk. FICO, which stands for Fair Isaac Corporation, specializes in the development of algorithms and scoring systems designed to evaluate an individual's creditworthiness. This predictive modeling analyzes various data points, such as payment history, credit utilization, types of credit accounts, and length of credit history, to generate a score that reflects the likelihood of a borrower defaulting on a loan.

This credit risk assessment is crucial for lenders when making decisions about extending credit, determining loan terms, and setting interest rates. A higher FICO score indicates lower risk to lenders, whereas a lower score suggests a higher risk.

The other options focus on functions that are not primarily related to FICO's role. For instance, developing investment strategies and conducting financial audits are typically roles played by financial advisors and auditors, rather than a credit score provider like FICO. Establishing credit limits for loans may be part of the lender's overall credit decision process, but it is based on the insights derived from FICO scores rather than a function of FICO itself.