Graduation Score from Equifax is a credit score that has been developed for lending to individuals that have primarily taken group loans in the past. It combines the bureau data from group loans and individual loans to provide a comprehensive credit score for the individual. Graduation score comes with the Combined Credit Information Report, which provides a complete view of all the tradelines of the customer across group loans and individual loans, including retail loans.
The higher sanctioned amounts of individual loans than the group loans previously serviced by group loan borrowers make the individual loans inherently riskier than the group loans to the same individuals. Also, while group loans have the advantage of the group lending model where individuals can contribute to pay the EMIs of a group member having temporary financial difficulties, the individual loans have to be paid entirely by the individuals themselves and therefore have higher probabilities of default than group loans.
There are also compliance criteria that exist for group loans that enable lower default rates. All the above challenges and the previously untested individual loan repayment capacity of group loan borrowers make it necessary currently for institutions to manually assess individual loan applications.The manual assessment includes evaluation of bureau data of group loans, individual microfinance loans and retail loans which requires a high amount of cost and time.
Equifax has developed a product innovation that combines the customer data from group loans, individual microfinance loans and retail loans. This product helps estimate the probability of customer becoming 60+ dpd on an individual MFI loan, retail loan or group loan within 12 months from scoring. This is different from current score products in the market that consider each of the product groups (group loans, individual loans, retail loans) separately for credit scoring.
Business Outcome: Graduation score from Equifax enables group loan customers to graduate to individual microfinance and retail loans and take loans for higher amounts and higher tenures. Graduation Score enables you to use a bureau credit score for evaluating individual loans for customers that have not had individual loans in the past and increase the amount of individual lending business.
Improve Risk Assessment: Using Graduation score from Equifax, you can improve risk assessment by reducing the amount of manual credit assessment and approving individual MFI or retail loans on basis of the customer’s probability of default.
Reduce approval time: Using a score level for approval based on the customer’s probability of default also reduces the amount of time taken for approval by reducing amount of manual assessment required for evaluation.
Combined credit report: Currently, bureau data for group loans, individual MFI loans and retail loans have to be evaluated separately for approval. The Graduation score comes with the Combined Credit Information Report, which provides a complete view of all tradelines of the customer across group loans and individual loans, including retail loans.
Increase individual loan business volumes: Volumes in the individual loan business have been low due to the higher default rates of individual loans and the lack of bureau credit scores in the market for risk assessment of individual loan applications. The Graduation Score enables you to cross-sell individual loans to current group loan customers and increase the amount of individual lending business. The current and consistent customer view from the Graduation Score and Combined CIR supports consistent credit decisions, strong revenue generation and profitability throughout the customer lifecycle.
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