CREDIT SCORING AND THE CONSTRUCTION
Date
2011-05-12
Authors
Lightfoot, Neil
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Abstract
Automated credit application scoring is integral to lending money. For banks
credit application scoring provides a mechanism for managing risk and hence
profit: for borrowers it means immediate access to goods and services which
might only have been accessible in the future. For borrowers, therefore,
access to credit fundamentally shapes their every existence. Whereas all
previous research exploring the unintentional effects of credit scoring has
focused on its discriminatory effects, the main purpose of this study was to
explore how borrower identity is unintentionally constructed through the credit
scoring technologies of a retail bank. With a view towards constructing
different borrower identities, it moreover proposed alternative scorecard
characteristics which hitherto might not have been explored.
The study was wholly explorative and thus qualitative in nature. Critical
ethnography was used as the principle method of analysis and means of
interpretation.
The main findings were that there are three broad sources of credit scoring
characteristics and that these characteristics are associated with, not
causative of, borrower riskiness. In addition, a non-exhaustive list of four
assumptions underpinning credit scoring and scorecards and seven
assumptions, which are made about borrowers by scorecard practitioners,
were identified. As a consequence of these assumptions it was argued that
there are groups of borrowers who are unintentionally excluded through credit
scoring. Two primary consequences of credit exclusion were entertained and
finally, some few alternative scorecard characteristics were proposed.
Collectively these findings support the view that borrower identity is
systematically fabricated on an ongoing basis through the naïve application of
processes, systems and technologies of credit scoring practitioners. It was
also argued that the future of application scorecard building would
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see more advanced variables being used which will give rise to a selfregulating
borrower, less overtly disciplinary banks, and more pervasive credit
bureaux.
Description
MBA - WBS
Keywords
Credit scoring, Banks and banking