Professional Documents
Culture Documents
Workshop
Today’s programme
• Introduction to credit scoring
• Overview of Experian’s bureau data and how
it influences a credit score
• Reviewing and underwriting an application
for credit
• The key implications of the Guide to Credit
Scoring 2000 and how to deal with declines
• Overview of why monitor scoring?
Introductions
Setting today’s objectives
Consumer Credit
Scoring Workshop
Introduction to credit scoring
Overview of credit scoring
Common questions…
• What is credit
?
scoring?
? • When do we use
bespoke and generic
scorecards?
What is credit scoring?
Bad Rate
• Score by
good/bad
Good Bad odds
Odds
• Score by
Good Bad good/bad
Odds odds
• Marginal
profit
5:1
• Score by
good/bad odds
• Marginal profit
Good Bad
Odds
Decline Accept • Setting a cut-
off
Good Bad
Decline Refer Accept • Marginal profit
Odds • Setting a cut-
Low AverageMaximum
Limit Terms Facilities
off
• Tailor services
No Promote Regular ◆Terms
Promotion Promotion ◆ Marketing
◆ Services
Score
Score 4 Max Loan £25,000
Max Terms 48 months
Apr 8%
Bespoke scoring
• Clients specific
scorecard
• Large sample (>2,500
SCORING
goods, bads,
indeterminates and
declined accounts)
• 2 years history required
BESPOKE GENERIC
• Delphi included as a
scorecard characteristic
Generic scoring
Who for....
• New products
SCORING • Evolving markets
• Small portfolios
• Limited data for analysis
• Fast implementation
BESPOKE GENERIC
Europe’s largest consumer
database
Combining elements of
Europe’s largest credit
bureau to provide
PUBLIC one simple highly predictive
INFORMATION
FILE Delphi SCORE
Experian’s bureau data used
in credit scoring
Experian bureau data
PUBLIC
INFORMATION
FILE
Key bureau
questions
Key bureau questions
Is your
applicant
confirmed
on the
electoral
roll?
Key bureau
questions
Is your
applicant
confirmed
on the
electoral
roll?
Does your
applicant
have any
CCJs? If so
how recent
and for how
much?
Key bureau
questions
Is your
applicant
confirmed
on the
electoral
roll?
Does your
applicant
have any
CCJs? If so
how recent
and for how
much?
Key bureau
questions
Is your
applicant
confirmed
on the
electoral
roll?
Does your
applicant
have any
CCJs? If so
how recent
and for how
much?
Key bureau
questions
Is your
applicant
confirmed
on the
electoral
roll?
Does your
applicant
have any
CCJs? If so
how recent
and for how
much?
… introducing Mr Jones
Default
score
800
Is the address traceable?
• 24 million addresses
Default
score
800
+ 30
points
Are there any records of public
information for your applicant?
PUBLIC
INFORMATION
FILE
How bureau characteristics
affect the score?
Default
score
800
+ 30
points
- 200
points
Is there a fraud warning
attached to your applicant’s
address?
CIFAS The UK’s Fraud Prevention Service
• The decision initially must be a REFER
• Established in 1988 to share fraud experiences
• Warning attached to an address - fraudsters
often use different names
• Obtain details from supplying member
• 9 categories of fraud eg.
- empty house = 1
- impersonation = 2
• Experian host the information
How has your applicant been
conducting their financial
affairs?
(Credit Account Information Sharing)
• Launched in 1983 - promote responsible lending
• Information provided on the: borrower, lender, credit
account
• 4 types of accounts - Active, Settled, Default and
Delinquent
• Characteristics looked at for example
◆ Active account arrears > 3 months
◆ High number of recently opened accounts
◆ High outstanding balance
◆ No active accounts in arrears
How bureau characteristics
affect the score?
Default
score
800
+ 30
points
- 200
points
- 150
points
How bureau characteristics
affect the score?
Default
score
800
+ 30
points
- 200
points
- 150 - 100
points points
How bureau characteristics
affect the score?
Default
score
800
+ 30
points
- 200
points
- 150 - 100 + 50
points points points
How bureau characteristics
affect the score?
Default
score
800
+ 30
points
- 200 + 40
points points
- 150 - 100 + 50
points points points
Has your applicant had their
house repossessed?
• Established in 1989
• Repossession register
• Closed user group
• Provides application address
• May provide forwarding
address
• Records are retained for 6
years
How credit active is your
applicant?
(Credit Application Previous Search)
• Record of previous credit searches within the
last 12 months
• Application information on:
◆ Applicant
◆ Application details
• Helps to identify over-omitted and fraudulent
applications
How bureau characteristics
affect the score?
Default
score
800
+ 30 - 70
points points
- 200 + 40
points points
- 150 - 100 + 50
points points points
How bureau characteristics
affect the score?
Default
score
800
+ 30 - 70
points points
Delphi score
- 200 = 400
+ 40
points points
- 150 - 100 + 50
points points points
Are there any financial associations
or aliases for your applicant?
• Identifying financial associations through:
- Joint applications for credit
- Joint accounts
en t
• Lenders by law must have c ons
consent from a consumer No
before carrying out a credit
search
Notification and consent
.
I/we agree that the Acceptance Bank may
search the files of a credit reference agency
which will keep a record of that search.
Details of how I /we conduct the account may
also be disclosed to the agency.
This information may be used by other lenders
in assessing applications from me/us and
members of my/our household and for
occasional debt tracing and fraud prevention.
storing data
YE
sharing of information S
prevention of fraud
customer management
The art of rejection - how to say
“no”
Written or verbal declines
Implemen
Why use monitoring?
• Ensure scorecard
performs optimally
Dynamic delinquency
Age of account
Application
Date 3 months 6 months 9 months 12 months
Q4 2001 1.3%
Dynamic delinquency
Residential Status
Score Owner Tenant LWP Other Total
Married 54 48
Single 32 41
Widowed 3 3
Divorced 9 7
Separated 2 1
Applicant population
stability
% of Applicants
Marital status Development Current
Married 54 -11% 48
Single 32 +27% 41
Widowed 3 3
Divorced 9 7
Separated 2 1
Why use monitoring?
Referrals
Age <21 1,000 1,000 50%
Unemployed 500 500 50%
Address not 500 1,500 75%
confirmed