Consumer credit scoring: do situational circumstances matter?
AbstractAlthough 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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Bibliographic InfoPaper provided by Bank for International Settlements in its series BIS Working Papers with number 146.
Length: 24 pages
Date of creation: Jan 2004
Date of revision:
Credit scoring; Consumer credit; Credit risk;
Find related papers by JEL classification:
- G2 - Financial Economics - - Financial Institutions and Services
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