Kredītinformācijas Birojs – KIB (Credit Information Bureau) unveils new scorecard for consumers
After intense work that lasted the past several months, Kredītinformācijas Birojs finally introduced a new statistical model that forecasts the borrower’s credit risk, last month. The new credit rating predicts the probability that a borrower will default on their credit obligations for more than 60 days in the next 12 months, with the amount of obligation being at least EUR 150.
Analyzing the fulfillment of liabilities of almost 3 million credit liabilities held in the data base of Kredītinformācijas Birojs, has made it possible to identify the factors that have the most significant impact on the ability of Latvian borrowers to successfully settle their liabilities. The variables and their impact on credit risk can be grouped into three large groups as seen on the graph below:
Borrower’s age – the older the borrower, the better the payment discipline. The analysis of credit liabilities in the period from 2017 to 2020 shows that borrowers aged 60 and more delay loan payments five times less than 20 years olds.
Structure of credit liabilities – the structure of existing credit liabilities at the moment when the borrower takes new liabilities. For example, the amortization rate of existing credit liabilities (completely new liabilities taken or paid the most part of existing liabilities). If the person has overdrafts / credit cards / credit lines, and what is the ratio of their limit to the amount actually spent, etc. For example, people who use almost 100% of their credit line for a long-time delay payment twice as often as people with an average monthly balance of 50% of their credit line.
Indicators of excessive borrowing – indicators such as several consumer loans to different lenders, the frequency of late payments, requests from remote lenders in a short period of time, overdue liabilities guaranteed by the borrower, past liabilities paid with delays or assignments, taxes and utilities debts, relationships with companies (as a board member or owner) which have significant payment delays, etc. are some of the indicators.
Individuals can get acquainted with their credit rating, which is used by increasing amount of Latvian lenders, by becoming a subscriber to manakreditvesture.lv. The new credit rating will replace the currently used model and is also available to current subscribers free of charge.
About Kredītinformācijas Birojs – KIB (Credit Information Bureau)
Kredītinformācijas Birojs – KIB (Credit Information Bureau) is a part of the world’s largest credit information and risk management solutions providing group “Creditinfo Group” and it aims to reduce the financial risks of companies and individuals. KIB was founded in May 2013 and is the first licensed credit information office in Latvia, licensed in the data processing field and supervised by the Data State Inspectorate.