Computer Says No! AKA – How Does Credit Scoring Work?


Computer Says No, or What Is Credit Scoring?

We often get asked this, or rather asked to explain how the decision made by the bank has been arrived at.

Firstly, Credit Scoring is a statistically based system which judges each proposal on a set of criteria driven from past experience. It doesn’t judge you on colour, creed, hairstyle or any other personality issue, it is purely fact driven.

If you do have a string of CCJs or delinquent debts then expect the worse, even so if you raise these issues with us we can still offer some good advice.

So This Must Be Good Then?

Well, it depends how you approach things. The theory is that past performance is an indicator of future performance, which is pretty fair. But, lets consider the following example –

Abraham Lincoln and John F Kennedy were both Presidents, elected 100 years apart, both shot by assassins known by 3 names with 15 letters. Lincoln had a secretary named Kennedy, Kennedy a secretary named Lincoln, both killed on a Friday, both succeeded by a man named Johnson (Andrew & Lyndon), Andrew was born in 1808, Lyndon in 1908.

So, statistically speaking there would be risk in being called Kennedy or Lincoln, having someone called Johnson around you, or being somewhere on a Friday.

However, we all know this is irrelevant. There are equally as many differences as there are similarities and it makes no difference who your secretary is or what they are called. But, if the same theory was applied to Credit Scoring then the similarities in risk may see your application declined.

So What Should You Do?

We had a client recently who ran a food business, it was about 50% eat in, 50% take away. His loan was declined because the bank considered restaurants to be a risk sector. Conversely, they considered the take away sector to be in growth. The issue here was in how he presented his business.

You need to be presenting the differences, the things that are relevant to the bank, but which make you unique. Whilst a bank will not tell you their criteria, otherwise everyone would play the system, there are ways of knowing which areas are your strengths and how to stress them.

Sounds Too Easy?

Well it always is. The key is in knowing what is relevant information, who wants to know what, and where to stress the importance of each part of your business.

That however is what we specialise in.

The simple answer is give us a call on 0844 682 1462 or visit email and get in touch for some really great, fast and free advice.

Please add your comments below, or call us for more information.



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