Experian s UK Credit Bureau Scores. Version 1.6

Transcription

1 Experian s UK Credit Bureau Scores Version 1.6 January 2014

2 About Experian Decision Analytics Experian Decision Analytics enterprise-wide solutions combine data intelligence, predictive analytics, decisionenabling technologies, strategy optimisation and consulting services to enrich client data and allow organisations to maximise profitability and performance from their customer relationships. Its fraud and identity solutions enable clients to prevent fraud at all stages of the customer lifecycle from authentication and application fraud through to transactional and open account fraud. Experian Decision Analytics works closely with clients in more than 60 countries across diverse industries, including financial services, telecommunications, retail, leasing, automotive, insurance, government agencies and utilities, enabling them to make billions of customer-focused decisions annually. With over 20 years experience in fraud and identity solutions, the company has clients worldwide and collaborates with organisations, associations and trade bodies to further develop data sharing schemes and support new fraud prevention initiatives. As part of the global Experian Group, Experian Decision Analytics has more than 30 years experience of managing bureau data, adding intelligence to that data and delivering analytical solutions. It maintains connectivity with more than 70 credit bureaus around the world and, with offices worldwide, is uniquely qualified to support local, national, regional and global businesses. 2 - Experian s UK Credit Bureau Scores - Version 1.6

3 Content 1. Introduction Consumer bureau scores Commercial bureau scores 4 2. Consumer bureau scores for prospect targeting Delphi for Mailings Score Geo Delphi Index Geo Detect Index 6 3. Consumer bureau scores for account origination Delphi for New Business Consumer Indebtedness Index (CII) Income Estimation & Verification New Business Affordability Metrics Identity Authentication Scores Detect Fraud Score And Credit Score Suspicious Activity Scores The CIFAS Score & Index Consumer bureau scores for customer management Delphi for Customer Management Propensity scores for Up-Sell, Cross-Sell And Retention Consumer bureau scores for collections & debt recovery Delphi for Collections Delphi for Debt Recovery Other consumer credit bureau scores Credit Expert Score Director s Delphi Score UK Delphi Commercial bureau scores Commercial Delphi Scores Glossary 17 Experian s UK Credit Bureau Scores - Version 1.6-3

4 1. Introduction 1.1 Consumer Bureau Scores Experian s consumer bureau scores are used throughout the UK credit industry to aid decision-making in every area of consumer credit activity: PROSPECT TARGETING ACCOUNT ORIGINATION CUSTOMER MANAGEMENT COLLECTIONS & RECOVERIES Experian credit bureau scores can be used for assessing all the following key consumer metrics: Creditworthiness Indebtedness & Affordability Propensity to commit fraud Risk of attrition Level of identity authentication Propensity to pay in Collections & likelihood of Debt Recovery 1.2 Commercial Bureau Scores Experian s commercial bureau scores are used to provide credit ratings and risk-related credit limits for over 90% of the commercial enterprises in the UK. 4 - Experian s UK Credit Bureau Scores - Version 1.6

5 2. Consumer Bureau Scores for Prospect Targeting 2.1 Delphi for Mailings Score The Delphi for Mailings (DfM) score is a pre-screening tool that enables high risk (i.e. low scoring) individuals to be identified and excluded from the marketing of new products and services to potential new customers. Three different versions of DfM gen. 9 exist as follows: Score with BDS* indicators for CAIS members Score without BDS* indicators for CAIS members Score for Non-CAIS members * Behavioural Data Sharing (on credit card accounts in CAIS) The DfM scores are designed to identify high risk individuals using all the personal credit bureau data allowed by the Principles of Reciprocity, plus a comprehensive set of geo-demographic variables, including Geo Delphi (see below). 2.2 Geo Delphi Index The Geo Delphi Index is a score-based measure of an individual s creditworthiness based on the area in which they live. The following Geo-Delphi Index values are generally used:- 0 Level of credit risk unknown 1 Very low level of credit risk (bad rate around 2%) 9 Very high level of credit risk (bad rate around 50%) The Geo Delphi score incorporates a wide range of risk-related geo-demographics - calculated at both postcode and postal sector levels. To ensure that the Geo Delphi Index cannot be used for red lining, it can only be used within scorecards consisting of multiple characteristics. Three different versions of the Geo Delphi Index exist based on the level of CAIS data used to develop them:- Non-CAIS version - used in DfM for Non-CAIS members Default-only CAIS version - used in the DfM scorecards available to all CAIS members Full CAIS version - used as a component of the Delphi scorecards used for Account Origination and Customer Management by full CAIS members (see section 3 and 4). Experian s UK Credit Bureau Scores - Version 1.6-5

6 2. Consumer Bureau Scores for Prospect Targeting 2.3 Geo Detect Index The Geo Detect Index is a score-based measure of the likelihood of an application for credit being fraudulent based on the area that it originates from. The index has the following values:- 0 Level of fraudulent activity unknown 1 Very low level of fraudulent activity (fraud rate less than 0.1%) 9 Very high level of fraudulent activity (fraud rate 5%+) Different versions of the Geo-Detect Index exist depending on each user s membership of CIFAS, National Hunter and CAIS. The Geo Detect Index is a recent DA development and is to be used both as a Prospect Targeting tool and for application fraud detection. Experian s UK Credit Bureau Scores - Version 1.6-6

7 3. Consumer Bureau Scores for Account Origination 3.1 Delphi for New Business Delphi for New Business is a suite of generic credit scorecards that is used in consumer account origination to assess the credit risk of potential new customers. The Delphi for New Business scores are used by over 150 major UK financial organisations, generating in excess of 70 million bureau scores each year. There are 7 main Market Sector based versions of Delphi for New Business, as follows: Banking & Finance Retail Non-prime financial services Telecommunications Utilities Insurance Pay Day Loans The Delphi for New Business scores are developed to identify high risk individuals based on the following types of credit bureau data: Same Person data (i.e. information on the individual applying for credit) Same Person Associate data (i.e. information on individuals with a financial association with the person applying for credit) The Consumer Indebtedness Index (CII) - see below The Geo Delphi Index (ref 2.2) In response to user feedback, versions of the Delphi for New Business scorecards now exist with and without the CII. 3.2 Consumer Indebtedness Index (CII) The CII is a score-based index developed to identify consumers that are showing no current payment difficulties, but that are likely to experience payment problems in the near future because of their level (and type) of credit commitments. The latest version (Generation 3) of the CII has the following values:- -3 No credit activity to date -2 No current activity but previous derogs. found -1 Individual not found 1 Very low level of indebtedness 90 Very high level of indebtedness The CII was the first consumer indebtedness metric ever developed and is now used by over 90% of the UK s major consumer credit providers. Experian s UK Credit Bureau Scores - Version 1.6-7

8 3. Consumer Bureau Scores for Account Origination 3.3 Income Estimation & Verification Income estimates are generated from a number of different Experian data sources for main applicant, joint applicant and family economic unit. Current Account Turnover (CATO) Current Account Turnover. Lenders provide details of current account turnover as part of a data sharing agreement hosted by Experian. Previous Application Demographics including Gross Annual Income are captured on previous applications primarily for fraud prevention purposes. This information is cleansed, segmented and summarised to provide income estimates for main and joint applicants. Credit Bureau Data A suite of models have been developed that use credit bureau data to estimate income. Models leverage all available data to generate estimates for the family economic unit income. Preferred Income Estimate The income estimates above are summarised into a single value. Using the Income Estimates for Income Verification By comparing an applicant s declared income against income estimates it is possible to verify income as part of the application process. The Income Verification Index is designed to measure the accuracy of supplied income, and has the following values:- -3 No data to verify income -2 Insufficient data to verify income -1 Individual not found 0 Applicant income is significantly over stated 90 Applicant income verifies 99 Applicant income understated An Income Verification Index is returned for main applicant, joint applicant and family economic unit. Experian s UK Credit Bureau Scores - Version 1.6-8

9 3. Consumer Bureau Scores for Account Origination 3.4 New Business Affordability Metrics While not being credit bureau scores as such, Experian s Consumer Affordability Metrics are heavily based on Experian s consumer bureau data. They have been developed specifically to facilitate the assessment of a consumer s affordability whenever they apply for credit, by providing the following key measure: Effective Disposable Income (EDI) - this is based on Net Monthly Income (from an application form) less Monthly Outgoings. The Monthly Outgoings calculation combines Monthly Credit Commitments (based on the active account information held on Experian s credit bureau), Monthly Expenditure (estimated based on the latest ONS survey data) and Monthly Mortgage/Rent. Experian s Affordability Metrics were designed to be used as an integral part of the Account Origination process, to provide an automated affordability check, along the following lines: Apply primary credit decision criteria (i.e. policy decline and cut-off score rules). Decline cases with very low affordability (i.e. a very low EDI). Apply refer rules for identity authentication and fraud detection. Apply other (credit) refer rules - but only to cases with low to moderate affordability. Accept all other cases 3.5 Identity Authentication Scores Experian s Identity Authentication scores have been developed for: ID Validation - this score uses a set of credit bureau data-based proofs to provide a measure of confidence that the supplied name actually exists at the supplied address. ID Verification - this score compares the personal details supplied on an application form (date of birth, telephone number etc) with those held on the credit bureau to provide a measure of confidence that the individual being authenticated is actually who they say they are. The ID Validation and Verification scores are then combined - along with a set of high risk policy rules - to produce an Authentication Index in the range 00 (high risk of Id fraud) to 90 (effectively no risk of ID fraud). The Authentication Index is used throughout the UK Financial Services industry whenever an electronic, real-time identity check is required. It has proved to be particularly useful in achieving compliance with the UK s anti-money laundering regulations. Experian s UK Credit Bureau Scores - Version 1.6-9

10 3. Consumer Bureau Scores for Account Origination 3.6 Detect Fraud Score and Credit Score These scores are embedded within Detect - Experian s on-line fraud prevention system. Detect works by cross-checking information supplied on an application form with the information held on the Experian credit bureau. Any inconsistencies found are highlighted via a set of Detect Policy Rules, which are then used to identify suspicious cases for further investigation. In order to enhance Detect s ability to find frauds, two scoring models are used, as follows: The Detect Fraud Score - this uses a combination of the Detect Policy Rules, application form data and bureau data to identify cases that are highly likely to be fraudulent. The Detect Credit Score - this uses bureau data at disclosed and undisclosed addresses to identify applicants that are a high credit risk. Two versions of the Detect Credit score exist - one for full CAIS members and one for Defaultonly CAIS members. 3.7 Suspicious Activity Scores Experian s Suspicious Activity (SA) scores use all the available credit bureau data at address level to highlight addresses that have suspiciously high levels of credit activity, and which are highly likely to be fraudulent as a result. Based on the SA score, a directory of the addresses with the highest likelihood of fraud is produced quarterly, and this can be matched to the addresses supplied on new applications for credit to help prevent further fraudulent credit activity taking place. National Hunter is used to investigate any suspicious addresses to decide whether or not the activity at these high risk addresses is actually fraudulent. The SA score-based address directory is also planned to be used in Customer Management to highlight existing customers with suspicious activity. Experian s UK Credit Bureau Scores - Version

11 3. Consumer Bureau Scores for Account Origination 3.8 CIFAS Score & Index Experian s CIFAS score brings together all the known fraud (i.e. CIFAS) data for a given individual and incorporates this into a single measure - Experian s CIFAS Index. The CIFAS score uses recency and frequency of known fraud data found at current, previous and undisclosed addresses, matched at three possible levels i.e. Same Person, Same Person Associate and Other. The CIFAS Index has been calibrated to have values in the following range: 0 No CIFAS match 1 Very low risk of fraudulent activity (fraud rate around 5%) 9 Very high risk of fraudulent activity (fraud rate over 50%) 97 Victim of Fraud registered 98 Protected Registration 99 Victim of Fraud & Protected Registration The CIFAS Index can be used by all CIFAS members to decide whether or not to refer credit applications whenever a CIFAS match is triggered. Experian s UK Credit Bureau Scores - Version

12 4. Consumer Bureau Scores for Customer Management 4.1 Delphi for Customer Management Delphi for Customer Management (DCM) is a suite of generic behavioural bureau scorecards that can be used in all areas of credit account management to provide a holistic view of each consumer s overall level of risk and indebtedness. For example, DCM scores are used extensively for: Credit Card limit management; Up-selling and cross-selling of additional credit facilities; Managing accounts in Collections; Predicting likelihood of default. The DCM scores are used throughout the UK consumer credit industry, with over 1 billion scores being generated every year. There are currently two types of DCM score covering a number of market sectors, as follows: Score for Arrears & Account Management (AAM) in the Banking & Finance Sector Score for Credit Risk Screening (CRS) in the Banking & Finance Sector Score for AAM in the Retail & Other Sectors Score for CRS in the Retail & Other Sectors Score for AAM in the Telecoms. Sector The DCM scores are developed to identify high risk individuals based on the following types of credit bureau data:- Same Person data Same Person Associate data The Consumer Indebtedness Index (ref. Section 3.2) The Geo Delphi Index (ref. Section 2.2) Experian s UK Credit Bureau Scores - Version

13 4. Consumer Bureau Scores for Customer Management 4.2 Propensity Scores for Up-sell, Cross-sell and Retention These bureau based propensity scores asses an individual s appetite for varying forms of credit over the next 6 months. Used in conjunction with risk screening scores they enable lenders to optimise response / conversion rates on cross-sell / up-sell campaigns to existing customers. In addition to identifying cross-selling opportunities the scores can also be used to identify attrition risks. These scores differ from traditional marketing propensities by using consumer level bureau data to provide a more accurate & complete view of consumer behaviour. Scores exist for the following objectives Propensity to significantly increase credit card spending Propensity to successfully open a new credit card account Propensity to successfully open a new personal loan account Propensity to successfully open a new motor finance loan account Propensity to re-mortgage or take out a mortgage extension Scores are only for use in marketing / retention campaigns to existing customers. Experian s UK Credit Bureau Scores - Version

14 5. Consumer Bureau Scores for Collections & Debt Recovery 5.1 Delphi for Collections Experian s generic collections scores assess the likelihood of an account in arrears making a payment within the next 3 months. Four versions of the Delphi for Collections (DfC) scores have been developed for:- Mortgage accounts Other Banking & Finance accounts Retail accounts Telecommunications accounts The DfC scores incorporate all the following consumer-level information:- Full CAIS level credit bureau data, including the Consumer Indebtedness Index The Geo Delphi Index Account level data (e.g. balance and arrears status) 5.2 Delphi for Debt Recovery Experian s generic Debt Recovery scores have been developed to assess the likelihood that non-paying accounts in default will respond to further Debt Recovery action. Two versions of the Delphi for DR score are available, based on level of CAIS membership:- Full CAIS members - applies to lenders that want to assess the likelihood of debt recovery on their own non-paying accounts in default. Default-only CAIS members - applies to Debt Collection Agencies that want to assess the likelihood of debt recovery on their dormant debt. Experian s UK Credit Bureau Scores - Version

15 6. Other Consumer Credit Bureau Scores 6.1 Credit Expert Score This is a direct-to-consumer credit bureau score that is effectively a generalpurpose Delphi for New Business Score (ref. Section 3.1). It was developed to provide Credit Expert subscribers with a view of how mainstream UK credit providers would assess their level of risk, based on their credit bureau data alone. 6.2 Director s Delphi Score The Director s Delphi score provides a view of how a director s/proprietor s consumer credit track record is likely to affect the performance of their (small) business. It is used for SMEs as a component of their Commercial Delphi score. Commercial Delphi uses Experian s Business Information databases (and the Director s Delphi score for SMEs) to assess the likelihood that a commercial enterprise will fail within the next 12 months - ref. Section UK Delphi The UK Delphi score is a general-purpose credit bureau score that can be used to assess the credit risk of any consumer in the UK. Its main use is in comparing the credit risk profiles of competing consumer credit portfolios within Experian s Industry Benchmarking reporting systems. Experian s UK Credit Bureau Scores - Version

16 7. Commercial Bureau Scores 7.1 Commercial Delphi Scores Commercial Delphi (CD) is a suite of generic bureau scores designed to predict business failure. The CD scores are used to provide credit ratings and - together with business turnover/size - commercial credit limits for over 90% of UK businesses. These credit ratings and limits are then used in the credit risk assessment of commercial enterprises in many different areas. For example: Commercial prospect targeting; Providing trade credit to both new and existing customers; Assessing applications for equipment (and other) leasing; Setting Credit Insurance premiums; On-going management of commercial credit lines. There are 2 main versions of Commercial Delphi, based on legal form, as follows: CD for Limited Companies CD for Non-limited Businesses Within each main version of CD, further scorecard segmentation is applied based on age and size of business. CD Scores blend data from a number of sources whose availability depends on company age, legal form, and CAIS membership. These include: Company financials; Public data, such as court judgements and bankruptcies; Payment data - for trade credit and instalment credit (Commercial CAIS); Previous credit bureau searches; Director s/proprietor s consumer credit bureau track record (ref. section 6.2); Director s/proprietor s track record with other businesses; Shareholding and group data. Experian s UK Credit Bureau Scores - Version

17 8. Glossary CAIS - The Credit Account Information Sharing scheme that is hosted by Experian in the UK CATO - Current Account Turnover. Lenders provide details of current account turnover as part of a data sharing scheme hosted by Experian in the UK. CIFAS - The UK s Fraud Prevention Agency, which facilitates the sharing of information on known frauds. ONS - Office for National Statistics Principles of - The UK Credit Industry s code of practice for the Reciprocity use of all shared credit bureau data National Hunter - An independent not-for-profit company primarily concerned with the prevention of application fraud within the banking, finance and insurance industry; and to protect victims of fraud. Their main role is to ensure that members share fraud data fairly accurately and effectively. SME - Small and Medium Enterprises CAIS - The Credit Account Information Sharing (CAIS) file holds information on over 440 million credit accounts 32 million of which are in default. CAIS files are held on the vast majority of the active credit population with an average of five records held per applicant. Information is provided by virtually every major consumer lending organisation in the UK. Established in 1983 to provide comprehensive and timely credit information, CAIS was the first system of its kind and is now by far the largest source of information about consumers credit histories in the UK. Experian operates CAIS on behalf of its members. The members who manage the scheme make the rules governing how CAIS operates. Experian s UK Credit Bureau Scores - Version

18 Experian Landmark House Experian Way NG2 Business Park Nottingham NG1 1EP Experian Limited The word EXPERIAN and the graphical device are trade marks of Experian and/or its associated companies and may be registered in the EU, USA and other countries. The graphical device is a registered Community design in the EU. All rights reserved.