What is a Credit Bureau Score?
- A credit bureau score is a credit risk assessment tool which analyzes and summarizes, into a single numeric score, all the historical files for each consumer or small business that is reported to the credit bureau.
- This score represents the odds or probability that that person or company will become a “bad payer” on at least one trade line within a specified period of time.
The Evolution Process of CB Scoring…traditionally
- Mature Database: A custom risk ranking scoring solution is delivered. This will allow consumers to be identified as a certain level of credit risk from high to low based on the custom scoring solution. Sufficient history in the credit bureau exists.
- History Development II : the CB information maturity makes possible the expert scoring model refinement.
- History Development I: an expert risk ranking score is delivered. This will allow consumers to be identified as a certain level of credit risk from high to low based on the expert score.
- Inception An expert risk ranking value is provided based on various risk criteria. This will allow consumers to be identified as a certain level of credit risk from high, medium, or low.
What are the key factors that create a stable credit bureau score?
- Score developed using globally accepted proven standard statistical techniques.
- Consistent Data Contribution to credit bureau
– # of Contributors
– Type of exposures contributed
– Frequency of contribution
– History of data
- Management of data contribution as it grows and/or changes
– Monitor data contribution
– Manage the addition of new data sources
– Control codes and format of data reporting
Consider influences on Credit Bureau Score Performance
What impacts the risk trends of a credit score by country?
– Consumer’s personal behavior towards repayment of debt
– Behavior based attitudes.
– Laws applied by specific country
– Data Reporting
– Product usage
Factors to measure in a Credit Bureau Score System.
What are the factors must be managed and measured to create a stable credit bureau scoring solution framework?
- Risk Trends
- Product contributions
- Data availability (history and content)
- Distributions (exclusions, segments, and score)
Perform GLocal Methodological Approach
- The design of a dynamic scoring solution integrates the score with the status of the credit bureau at various points in time, the economic conditions, the cultural lending/usage values, market and legality of data reporting. Occurs on-going.
- This is done by focusing on the culture, market, data, and economy.
- The key is to manage the all of these factors with the data evolution to provide a scoring system.
What are the core principles for performance results?
The data is the backbone to the development and sustainability of a credit bureau scoring solution from inception.Consumer’s Payment Behavior A consumer may be influenced by laws and culture, but ultimately whether a consumer pays or does not pay tends to behave similar characteristics that are predictive of this behavior.
Consumer’s Payment Behavior
A consumer may be influenced by laws and culture, but ultimately whether a consumer pays or does not pay tends to behave similar characteristics that are predictive of this behavior.
Test methodological approach
- Sample Design for simulation
Outcome Period – 12 months to align with a global standard.
Performance Definition for simulation
- Any 90+DPD tradeline within the 12 month performance period.
- Not Bad and at least one tradeline was 60DPD within the performance period.
- Not Bad, not Indeterminate and all tradelines are less than 60DPD and at least 6 months old
- Credit Bureau report did not have enough data to define performance
Attributes used for ranking risk
- 3, 6 or 12 months of history was utilized to create attributes for testing varying levels of bureau maturity.
- Priority of Attributes were varied based on the cultural lending
- Usage of credit and creating debt.
- Minimal credit usage.
- Market offerings (type of credit).
- Most predictive of risk