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- Good morning, sir. I am glad that your company has chosen to partner with us in alternative data as part of credit evaluation. May I illustrate how we will use alternative data and modern modelling techniques for credit scoring rather than using traditional financial data and its scorecard models?
- Good morning, Alenna! Sure, I would like to understand and find out how your company does credit scoring.
- Doing traditional credit analysis, realise more problems and compare it with it was done using alternative data.
- Wow! Impressive. Can you do an in-depth analysis of both credit scoring models?
- Okay, sure sir. May I invite you to the meeting room to see the research on credit scoring models my team and I have compiled?
- Difference b/n Traditional and Alternative Credit Scoring- Differing criteria to determine a borrower's score.Traditional credit scoring - determined strictly by borrower's lines of credit such as payment history, current debts, credit utilization ratio.Alternative credit scoring- lender evaluate data such as property record, shopping history, check account data , may include borrower's education, occupation
- Sir, I consolidated the difference between traditional and alternative credit scoring here.
- Here is an in-depth analysis of both credit scoring models. On the left is a comparison of how traditional financial data and scorecard models are used, and on the right is how alternative data and modern modelling techniques are used.
- Hmmm, okay, you have listed down the comparisons.Why are alternative data and modelling techniques preferred to traditional scorecard models?
- As can be seen on the left, alternative credit data is better than traditional credit data as it brings better returns and insights in credit risk modelling. This helps more borrowers to qualify for loans, and it provides more insight into a consumer's creditworthiness. Moreover, the research done by FinRegLab shows that they support greater use of alternative data, such as cash-flow data. The reason is the ability to predict credit risk where traditional bureau data is not available.
- Yes, indeed. I can tell the alternative data is better to use for credit scoring. Okay, I have decided to partner with your company and adopt technology to perform credit analysis and automate credit evaluation for education loans.
- Mr Leong on the phone with Alison, his secretary
- Thank you, sir, for your co-operation. I hope we will have another opportunity to work together in the future.
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