What is credit scoring?

Almost every person faced with a credit, will be able to say what a credit bureau or collection agency. But, what it represents credit scoring, he knows not everyone. Scoring - a system for assessing the creditworthiness of the borrower or potential client that has already received a bank loan. The assessment is based on numerical statistical techniques that are applied at different stages of the relationship between the company and the client. According to the results of points system itself decides on the approval or refusal of credit. Of course, the possibility of mistakes in this case is not excluded. Therefore, if we are talking about a substantial loan, the last word still rests with the loan officer. How does it work? Credit scoring was first introduced about 50 years ago in the form of so-called scorecards. He is now being implemented in two ways: by using Microsoft Office Excel, and thanks to specialized software. The first scheme of work is rather simplistic, it is used in most Russian banks. The procedure works like this: a bank clerk manually puts points, guided by the credit application and information about the borrower. Ie much depends on the individual bank employee: how it is objective evaluation criteria, etc. The second way of assessing the client automatically, moreover, this occurs for some minutes. Each bank is building the individual scheme of scoring. For example, all the signs that determines solvency person appointed by a certain number of points. In addition, construct and predictive model, based on which one can suggest how the borrower will prompt payer. The assessment is made of 10-12 basic parameters. Marital status, the presence of a personal car, frame Occupation, size and sources of income, the data on close relatives, property, etc. The system then puts the scoring evaluation. If the client was below a certain level, he can not become a borrower of the bank. Types of Application-scoring scoring - Integrated assessment of creditworthiness of the person. If the client receives the required number of points, then the loan, respectively, it will be denied. Usually this type of scoring is one of the intractable for many potential borrowers. Fraud-scoring - allows to detect and prevent fraud on the part of both potential and existing clients. This kind of scoring performs numerous procedures, cut-off fraudsters. Fraud-scoring performs many functions: he is engaged and the evaluation of borrower credit, and analyzing the behavior of credit card holder, and more. etc. Collection-scoring - works with "bad" borrowers. In fact, collection-scoring is the mechanism of in arrears. For example, if a person retains the mortgage payments, the bank began to remind him of the need to repay the debt. Features of use to begin with that scoring, with all its high-tech, there are certain drawbacks. Well, for example, the program can not always give the borrower an objective assessment. Ie sometimes it is necessary that the final decision endured an experienced specialist. On the other hand, some banks (relatively small) scoring system is used inefficiently. There is, on the contrary, it is that customers evaluate a very superficial way. Sophisticated mathematical computations nobody does, just look at the man, will check an income statement and prokredituyut. As a result, honest taxpayers pay high interest on the loan in order to protect the bank from the risk that someone (as a result of this assessment) can not pay on time. Of course, credit scoring has its pluses. To begin with, it's totally impartial evaluation system and, moreover, very quickly: application process is very fast. And banks in which the scoring works, do not set too high interest rates, because the system reduces the risk of defaults to a minimum. For Russia, scoring a fairly new phenomenon. At the moment, such an assessment system for use by no means all banks, however, as they say, the process of "prizhivaniya" we have not yet been completed. Another thing in the West, there exists a system of scoring more than one decade. And experience shows that even very effective.