Scoring is a statistical technique that is used widely to gain insight into the future payment behaviour of individuals and companies. For years, the science-based techniques have also been used by credit institutions, credit agencies and rating agencies to evaluate creditworthiness. Consumer protection groups and data privacy advocates are increasingly occupied with the question "what is scoring?", because scoring procedures are controversial. inkassoportal.de will thus answers the question of "what is scoring?"
Scoring is an analytical forecasting and point rating method that calculates the probability of every individual end customer exhibiting a certain behaviour. Scoring can help to identify the opportunities and threats in customer relations at an early stage. Analysis methods are used to determine the ideal feature selection and weighting in a "scorecard", which allows companies to predict the probability of a particular behaviour of a future end customer .
The finance and credit industry uses a similar statistical process to forecast the repayment probability of loans. One of the fields of application is credit scoring, which can be used in all types of credit transactions. It is used by banks to assess the credit rating of a borrower, i.e. the ability to meet loan obligations. In the private customer sector, analyses of this kind and the use of standardised procedures are also prescribed by the implementation of the Basel II accord.
infoscore Consumer Data GmbH (ICD) is part of the risk management division of Arvato Financial Solutions. Its functions include the provision of data on creditworthiness and the development of scoring solutions. Scoring is a forecasting and point rating method in which empirical values of solvency are analysed, for an indication of a customer's probability to default. The ICD's scoring process is used to anticipate the likely behaviour of end customers and weighs up opportunities and threats.
Since the amendment of the Federal Data Protection Act (BDSG) in 2010, credit agencies disclose what data is utilised in the calculation of the score. For example, Schufa indicates that scores are calculated using only data that has reference to Schufa. These include the frequency of borrowing, number of current accounts, possible payment defaults and recorded dunning procedures. According to their own account, Schufa does not use information about nationality, occupation, income or residential environment.
The features, i.e. the data used in scorecards, such as the Informa-Consumer-Score or industry scores and their weighting are highly dependent on the industry (e.g. mail order, credit industry, telecommunications including mobile networks, insurance) and the purpose of the projection (e.g. risk of payment default, tendency to cancel). According to the amendment of the BDSG , scoring may only be based on relevant data. The scores obtainable from infoscore Consumer Data GmbH meet these requirements.
Scoring, as an indication on the likelihood of smooth loan repayments, plays an important role in the making of credit decisions. Banks may reject credit applications without justification if the calculated score is too low.
What is scoring? - observations from a consumer protection point of view
Consumer and data protection groups view the question "what is scoring?" somewhat critically. In their opinion, the valuation can be influenced by data that is only indirectly indicative of your creditworthiness.
Microgeographic information also has some influence on scores. In practice, this often happens if no other credit-related data is stored about a person. In some industires, only a small amount of valid data is available. In these cases, the decision is often influenced by external data, (e.g. from providers of marketing data, risk data and external scores. However, credit-relevant features the forecast accuracy of which has been validated in extensive mathematical analyses for the respective client, will always be used. As a consumer, you have the right to block the provision of a score determined for you.