A well-paid job, no arrears in paying bills, a good history in BIK and many other premises confirming that the potential borrower is a reliable and honest person does not guarantee a positive credit decision. Sometimes a seemingly insignificant nuance can cross the prospect of getting a mortgage, cash loan or loan. Bank scoring may be to blame for everything. See what it is and how easy it is to improve your scoring.
Bank scoring - definition
The term scoring is a method that allows you to assess the borrower's credibility, assess credit risk and assess whether a person will have a problem with paying back cash on time. Statistical tools are used for this. Put simply, the profile of a potential customer is compared with the profile of other people who have already received a loan or credit.
The result is in point form. The higher the score and the number of points similar to the score of the person who repays the amount due on time, the less risky the applicant is for the bank. Consequently, the financial institution will be more willing to grant him a mortgage or loan. A high number of points results in better loan conditions, e.g. a lower margin.
Scoring models
We can distinguish the following scoring models - behavioral scoring, application scoring, credit scoring. The first one is nothing more than an analysis of the applicant's previous service of financial products and on this basis, awarding him points.
Application scoring consists in awarding points taking into account the personal and property data of the applicant. They are specified in a special tab. When summed up, these points constitute a measure of the potential borrower's risk assessment.
We can also distinguish fraud scoring, i.e. a process in which potential or existing customers are assigned the likelihood of committing forgery or abuse.
It is worth emphasizing that credit scoring is not only used by banks. Some non-financial companies also take this score into account. This happens, for example, in the case of GSM operators when selling prepaid phones.
Information analyzed in banking scoring
Bank scoring analyzes such data as: age, marital status, occupation, education, position, nationality, type of employment, place of residence, household budget, number of dependents, possession of a car, bank account, payment card or insurance, as well as period of employment in the current position and many other such information.
Then the score is compared with the scoring table. If the minimum level has not been reached, the bank issues a negative credit decision. In a situation where the scoring slightly exceeded the lower limit, then it should be expected that the lender will request additional collateral or a surety for the liability. It can also lower the loan amount.
Each bank uses its own scoring system, which is why there may be a situation where one institution refuses to grant a loan, and the other institution accepts a cash loan application.
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