Robert B. Avery (Board of Governors of the Federal Reserve System) Paul S. Calem (Board of Governors of the Federal Reserve System - Division of Research) Glenn B. Canner (Statistics)
Abstract
Although credit history scoring offers benefits to lenders and borrowers, failure to consider situational circumstances raises important statistical issues that may affect the ability of scoring systems to accurately quantify an individual's credit risk. Evidence from a national sample of credit reporting agency records suggests that failure to consider measures of local economic circumstances and individual trigger events when developing credit history scores can diminish the potential effectiveness of such models. There are practical difficulties, however, associated with developing scoring models that incorporate situational data, arising largely because of inherent limitations of the credit reporting agency databases used to build scoring models.
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Publisher Info
Paper provided by Bank for International Settlements in its series BIS Working Papers with number
146.
Find related papers by JEL classification: G2 - Financial Economics - - Financial Institutions and Services
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