AffordabilityMetric
In response to a marketplace that is growing increasingly concerned about the issues of over-indebtedness, DecisionMetrics has introduced its unique AffordabilityMetric solution.
The concept was to build a solution that could cope with limitations in data. If every lender had a full breakdown of income and expenditure, life would be easy but most do not and there needs to be a way to model external information to derive substitutes for the missing values. It is in this area where much of the sophistication lies as it is relatively straightforward to calculate affordability once you have suitable data.
Its purpose at the extreme is to identify those applicants that are clearly over-indebted and thus prevent a lender from making the tabloid headlines; but its real work is to identify when the granting of further credit to an acceptable credit risk is likely to push them beyond the point where they can continue to maintain that previous good repayment record. One of the spin-off benefits is that it can also identify those applicants that can clearly afford more credit which is an aid to cross-selling or credit limit increase assessment.
AffordabilityMetric can be provided as a ‘generic’ solution but ideally it should be tailored to fit the profile of a lenders portfolio and this is the typical approach taken to implementation. This calibration exercise requires a sample of Client’s data followed by an evaluation of the most suitable set of calculation parameters and implementation strategy.
Once the analysis stage has been completed, the solution is delivered as an ‘implementation ready’ software package that can be accessed via simple XML calls. The parameter set is available to the lender to allow updating of these parameters as well as stress testing of alternate forecasted economic circumstances.
