Tag Archives: Credit Risk

Collections & Recovery Collectors: Don’t Let IFRS 9 Blindfold You

IFRS 9 on blindfold
Aug302017

There’s a clear pecking order when it comes to the IFRS 9 accounting standard that goes into effect in January. It’s an accounting standard, not a piece of banking regulation, so the hierarchy is Finance, Risk and then Collections. This makes sense, but for debt managers it will cause problems. It’s likely that many debt managers will be blind next year on how they can influence impairments. Here’s how things will happen. Your Finance team will talk to your organization’s accounting firm and auditors, and they will agree how IFRS 9 should be implemented. They will probably work your Risk department when it comes to preparing the predictive models that are required to determine expected loss under IFRS 9. Once that’s done, the rules for your organization will be binding. It’s unlikely that the Collections team will be part of the process. And if you’re in Collections, you might think... [Read More]

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Analytics & Optimization Using Alternative Data in Credit Risk Modelling

Aug292017

“Whenever I bring up the topic of alternative data, the first question our board asks is, ‘Are we using Facebook data?’ “ This comment from a participant in our recent EMEA Risk Leadership Forum caused a lot of chuckles and nodding heads. When it comes to evaluating credit risk, everyone wants to know if, when and how lenders will start probing their Facebook account. For reasons that will be obvious to lenders, that tantalizing possibility doesn’t actually top the list of data sources to mine. In fact, at the forum we explored a few sources of data that can add to the picture of a consumer’s creditworthiness. Multiple Types of Alternative Data What is alternative data? In credit granting, it generally refers to any data that is not directly related to a consumer’s credit behavior. Traditional data usually means data from a credit bureau, a credit application or a lender’s... [Read More]

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Risk & Compliance FICO Research: Student Loan Debt Explodes Across Age Ranges

Writing on chalkboard
Aug232017

Student loan debt in the United States has reached about $1.34 trillion.  It’s greater than the aggregate of credit card debt.  But surprisingly, we haven’t seen much in-depth analysis about the spread of this debt burden across the expanse of ages within the U.S. population.  Our latest research reveals that, over the last 10 years: The percentage of middle-aged and older population carrying student loans has doubled The average balance on those student loans has grown 40% Middle-aged and older populations are having a harder time making their student loan payments on time Student loans aren’t just an issue for the younger generation. Increasingly, they are a problem suffered by Americans of all ages.  Let’s look at the numbers. Figure 1.  More People Have Student Loans  Age Percentage of Population with Student Loans 2006 Oct 2011 Oct 2016 Oct %△ 2016 over 2006 18-24  39% 46% 49% 25% 25-34  29%... [Read More]

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Risk & Compliance US Average FICO Score Hits 700: A Milestone for Consumers

Jul102017

FICO regularly tracks the national FICO Score distribution as an important gauge of US consumer credit behavior. When I last blogged about this topic based on data from April 2016, the key takeaway was “the beat goes on.” US consumers continued to show improvement in managing their debts, which began shortly after the bottoming out of the economy in 2009-2010. We have pulled the latest FICO Score distribution information based on a snapshot of millions of US consumers’ credit data as of April 2017, and can report that consumer credit health and responsibility continue to be strong! For the first time since we’ve been tracking these stats, the average national FICO Score reached the 700 threshold — some 10 points above what it was just prior to the recession in October 2006. Let’s dig a little deeper by examining the score distribution over the past 10+ years. The movement in... [Read More]

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