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Experience needed to assess risk, not automated systems

The tragedy of the market is highlighted by my dark-haired colleague (see previous letter). Here is a skilled risk-taker who is unemployed while big lenders blithely persist with the credit scoring approach.

Don’t get me wrong, I believe scoring works with the lowest of risks and this is undoubtedly highlighted by the tightening of criteria by large banks.

But what about perceived higher risk cases? What happens to the ones that lack a full credit history, or the ones with small defaults or minor income stretches?

There are some good cases to be approved but a machine can’t discriminate between individuals – it lumps them all into one pile.

It takes a lot of experience to weed out the bad or fraudulent cases. This requires intelligence, not automation.

If anyone needs a good example of the effectiveness of credit scoring, remember that GMAC Financial Services was once the champion of electronic underwriting.

Then note the news last week that it is leaving the European market and has arrears on some of its securitised books.

Smaller building societies have had to be niche lenders for years because they couldn’t compete on price yet they are declaring some of the best results. I wonder why.



GEMHL targets clients with credit blemishes

GE Money Home Lending has overhauled its product range to cater for borrowers with minor credit blips but has ditched its self-employed offering. The lender says it wanted to test the products on full status applicants but has not ruled out catering for the self-employed in future. Rates for its GEM1 product start at 4.54% […]

House purchase approvals rose 12% in February

The number of house purchase approvals grew by 12% in February to 35,000, data from the Council of Mortgage Lenders reveals. The trade body says January was a weak month due to one-off factors including the end of the Stamp Duty holiday in December and severe weather. The 35,000 loans advanced signifies a modest recovery, […]



Last week saw some encouraging moves including ING trialling the broker channel, a top investor entering our sector and Virgin Money considering using intermediaries – all good stuff

Retirement - thumbnail

A downhill stroll?

The Department for Work and Pensions (DWP) has recently published new research, which once again demonstrates how the prospect of retirement is changing for older workers.


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