Consulting services of Creditinfo Solutions in the area of credit scoring are focused on development, testing and implementation of scoring models supporting credit risk management in financial institutions.
What is Credit Scoring?
Credit scoring determines statistic probability of the situation when credit, loan or a different obligation is not paid duly and in time. Credit Scoring is based on the assumption that statistic methods are able to predict future behaviour of debtors on the basis of their behavioural details or other (similar) debtors in the past. Credit Scoring calculates the risk level and reduces the level of subjective evaluation within the decision making process about the credibility of a debtor. This technique dramatically simplifies the procedures of evaluating applications for financing within RETAIL and SME segments. At the same time the Credit Scoring model enables quicker and easier risk management in credit risk management departments. Credit Scoring is one of the most reliable and coherent techniques, which reasonably defines potential levels of risk connected to a potential or existing debtor. However, Credit Scoring may not be used in all occasions everywhere. Other techniques enabling risk assessment exist. Within the recent decades Credit Scoring has been among the most frequently used techniques. Traditional scoring models enable sorting of clients according to probability of default occurrence based on the achieved score - points. Inversely, proportional scale of the achieved points and the corresponding probability of default represent a standard in many financial institutions throughout the world.
Creditinfo Solutions specializes in expert and statistic scoring models and collaborates in their development with the affiliated company within Creditinfo Group. Creditinfo Solutions offers consulting services in development for the following models:
- Application Scorecard - Scoring model based on the details acquired within the acquisition of new clients, particularly from the details stated in a client’s application. Basic variables used within the model are social demographic variables, features of a unit (RETAIL, SME) and also information obtained from the available credit registers and databases of debtors. This model is applied during the acceptance or refusal of a potential debtor, fixing of credit limit or when determining interest rate on the basis of the risk-based pricing method.
- Behavioural Scorecard - Scoring model based on the details acquired from behavioural information of a debtor as a client or a customer of a creditor. It is a scoring model, which uses details from main accounting or transaction systems and other databases inside the financial institution. This model is applied namely for the portfolio management needs, monitoring adapting credit limits, re-approval of certain credit products, as well as for the interest rate determination. A special model of this scoring is a model supporting decision-making processes about suitable methods used for debt collection and overdue obligations.
- Credit Bureau Scorecard - Scoring model based on behavioural details of a client within the history database of the credit register payment behaviour. From the viewpoint of informative ability and stability it is one of the best models the financial market may dispose of. Application of the model contains all aforementioned moments of an application and behavioural scorecard. The power of this model rests particularly in the fact that many times it substitutes any information about a debtor, which is available only in the credit register database.
Advantages mentioned by our clients
- Reduction of Non-Performing Loans Portion - Use of score improves the selective process from the mass of potential debtors. Rejection of applicants with a low score (high probability of difficulties) preventively improves the portfolio level.
- Better Conditions for Reliable Debtors - On the basis of score it is possible to individually set conditions for the relevant segments of debtors according to the risk. Not only it is possible to reduce interest rate for the applicants with a high score, it is also possible to increase interest rate for the applicants with a lower score and reflect adequately purchased risk.
- Risk Management - Use of scoring models significantly improves the work of risk managers in several aspects. Due to score application their influence on portfolio is higher and the given change may be introduced very quickly without unnecessary delays connected to adapting conditions for individual credit account managers.
- Cost Reduction - This scoring model is an ideal item of the automated process. Scoring model integration enables risk managers to spend more time deeply examining certain marginal and specific areas of risk. In this way the whole model of evaluating applicants has been improving and the manual process related costs have been reduced.
- Consistent and Correct Decision - Without using the scoring models the approving staff involves more personal and subjective methods into the final decision. It is the cause of a statistically inconsistent basis of decision, which may be close to the moral hazard to the detriment of a debtor. Credit Scoring has a clear, comprehensible and informative ability, which is better in terms of tenability than any other argument.
Credit Scoring helps to make quicker and correct decisions and Creditinfo Solutions is prepared to help with applications and the development of a scoring model used in your day-to-day activities.
Product Features
Consultations focused on credit scoring consist particularly in turnkey delivery of the whole model corresponding to the requirements of a client. Development of a model lasts approximately 3 months and success of its development is based on the collaboration between the client and the Creditinfo Solutions team. It means namely correct definition of the target segment, use of the scoring model and determination of data, which are necessary for proper development of a statistical scoring model.
Users of the System
Typical clients of this product are banks, leasing companies, consumer finance companies and other companies who, to a certain extent, provide their customers with the services financed by loans or credit. Credit scoring may be used by telephone operators, mail-order companies, power distributors, etc.
Additional Information
Due to the considerable extension and complexity of the offered solution we are prepared to meet you at any time within your convenience in order to give you the most details and to demonstrate the system. Please do not hesitate to contact us.