Our approach to the development of a credit bureau is to harness the power of the data that is available in each market.
Risk management is a crucial element in the lending process, not only when a customer first applies for credit, but throughout the customer life cycle.
Credit scoring reduces the element of subjectivity in lending decisions, thereby allowing much more effective business management.
A credit score represents the statistical probability of an account falling into arrears. It enables the use of statistical techniques to accurately predict the future performance of groups of customers or prospects, by examining the past performance of individuals with similar characteristics.
Experian has developed a range of credit bureau scorecards that allow lenders to effectively evaluate the risk associated with acquiring new customers, as well as drawing the lender's attention to impending customer problems, allowing them to take appropriate action.
Experian can deliver generic scorecards to be integrated within a newly established credit bureau solution. These scoring models are developed by leveraging experience and understanding of credit behaviors within similar markets. The objective is to allow for the deployment of a bureau scoring model within a credit bureau system that has yet to compile enough data to develop a customized scoring model.
Once enough data has been amassed on the bureau, the following scorecards can be developed for the market:
The availability of performance data within the credit bureau will then enable Experian's analytics team to develop a bureau scoring model customized on the data quality and dynamics specific for the local market. This exercise will produce a more predictive scoring model which will be able to significantly discriminate between "good" and "bad" borrowers.
The CII is a Bureau scoring solution that enables lenders to identify individuals that are highly committed and likely to become over committed and therefore bad payers, in the future.
This scoring model is normally implemented as the credit market develops to a stage where responsible lending (and borrowing) may become a potential issue.
This score was specifically developed for use within the marketing arena. It allows marketers to identify future potential risk prior to mailing. This means that mailings can be targeted at only those prospects that present an acceptable level of risk.
Aligning the Delphi for Mailing score to the application decision making process significantly improves approval rates and reduces the cost per new customer acquired.
Ultimately, in a mature market, scorecards relating to specific market sectors, such as credit card etc, can be developed. These will take the specific requirements of the particular market sector into account.