Consumer credit scoring: do situational circumstances matter?

Robert Avery, Paul Calem and Glenn Canner
Additional contact information
Robert Avery: Board of Governors of the Federal Reserve System
Paul Calem: Board of Governors of the Federal Reserve System - Division of Research
Glenn Canner: Statistics

No 146, BIS Working Papers from Bank for International Settlements

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.

Keywords: Credit scoring; Consumer credit; Credit risk (search for similar items in EconPapers)
JEL-codes: G2 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2004-01
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Citations: View citations in EconPapers (39)

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