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Consumer credit scoring: do situational circumstances matter?

  • 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


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    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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    Paper provided by Bank for International Settlements in its series BIS Working Papers with number 146.

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    Length: 24 pages
    Date of creation: Jan 2004
    Date of revision:
    Handle: RePEc:bis:biswps:146
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    1. Robert M. Hunt, 2002. "The development and regulation of consumer credit reporting in America," Working Papers 02-21, Federal Reserve Bank of Philadelphia.
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