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BANKS and financial institutions will soon have a new tool at their fingertips to help them assess the risks of lending money to individuals.
A credit rating system using both bank and non-bank data will be able to tell lenders whether a borrower's credit standing is strong, good, fair or weak.
In other words, the system will be able to measure the probability of an individual defaulting on his loan.
The DP-Delphi Score system - a first in Singapore - is a joint effort by global credit reference agency Experian and Singapore's DP Credit Bureau.
Ms Chen Yew Nah, managing director of DP Information Group, said: 'As we all know, the world is recovering from a great credit crunch. The way lending decisions are made is going to change.
'What is needed is a better way for banks and financial institutions to assess the risks of lending money to individuals.
'And consumers need a clearer and more transparent way to understand their credit standing and how their payment behaviour affects their ability to access financing.'
A credit rating system is already used in the United States, Canada, Britain and other nations to estimate an individual's creditworthiness.
Credit bureaus evaluate a borrower's overall credit rating by calculating financial history, as well as current assets and liabilities.
A poor rating indicates a high risk of defaulting on a loan, bringing high interest rates or the refusal of a loan.
The DP-Delphi Score works the same way. Individuals will get a numerical score on a scale of 220 to 781 indicating how weak or strong their credit rating is.
The system uses three major local databases: information from banks on the payment behaviour of customers; public information on credit-related litigation individuals may be involved in and if they are involved in bankruptcy proceedings; and non-bank repayment data contributed by Singaporean businesses, cooperatives and retail stores to DP Info's SME Commercial Credit Bureau.
Ms Chen said: 'Because the DP-Delphi Score is based solely on Singapore data, it is highly predictive of consumer behaviour here.'
MAKING SURE A DEBT IS PAID
'As we all know, the world is recovering from a great credit crunch. What is needed is a better way for banks and financial institutions to assess the risks of lending money to individuals... Because the DP-Delphi Score is based solely on Singapore data, it is highly predictive of consumer behaviour here.'
Ms Chen Yew Nah, managing director of DP Information Group
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