Consumer Credit Scoring: Do Situational Circumstances Matter?

24 Pages Posted: 20 Sep 2007

See all articles by Robert B. Avery

Robert B. Avery

Board of Governors of the Federal Reserve System

Paul S. Calem

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Glenn B. Canner

Board of Governors of the Federal Reserve System

Date Written: January 2004

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

JEL Classification: G2

Suggested Citation

Avery, Robert B. and Calem, Paul S. and Canner, Glenn B., Consumer Credit Scoring: Do Situational Circumstances Matter? (January 2004). BIS Working Paper No. 146, Available at SSRN: https://ssrn.com/abstract=901386 or http://dx.doi.org/10.2139/ssrn.901386

Robert B. Avery (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-2906 (Phone)
202-452-5295 (Fax)

Paul S. Calem

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Glenn B. Canner

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
406
Abstract Views
2,476
rank
90,507
PlumX Metrics