Credit Data and Scoring

Chapter nine

The mystery of credit scores

Abstract

As limited as are the data in credit reports, there are still hundreds if not thousands of variables in every credit report, and no human agreement about what is most important. Thus, they are data mined in models that predict delinquency or default, and the probability is called a credit score. FICO, by being first with such a score, and the cleverness to put it in a relative score from 300 to 850, has become a standard in many US markets. The score, created by computers, is immune to explanations of what this or that was done or happened, or even to pointing out errors in the data. To both give enough information about the score to avoid anger but still sell their proprietary model, ...