Congress is about to enact the most sweeping financial reform legislation since the Great Depression. My concern is that, despite the best of intentions, unless lenders embrace an entirely new system of underwriting loans, they, their borrowers, and the financial system itself, will continue to be vulnerable to the tendency [...]

There are three things that will kill a loan portfolio: 1) Concentrations 2) Exceptions 3) Greatly over-valued collateral On the first item, concentrations, examples abound. I recall sitting on the Asset/Liability committee at NCNB Corporation in the mid-late 80′s, and hearing our CEO, Hugh McColl, reflect that “every one of [...]

In the first chapter of my latest book, Credit Risk Assessment: The New Lending System for Borrowers, Lenders, and Investors, I quote John Dewey, educational pioneer, who said “A problem well-defined is half solved.” The key to solving the loan underwriting problem that exists today is framing it — that [...]

I call fact on that! I am in the process of preparing a keynote address entitled Credit Access And Risk Management: A Gap To Close, for an International Banking Conference sponsored by Asobancaria, Colombia’s Banking and Financial Entities Association. The conference will take place in late November in Cartagena, Colombia. [...]

In the September 2009 issue of the RMA Journal, the 5 C’s of Credit have again achieved center stage as “the banking world’s long-established tools for credit analysis,” to quote the author, Warren Stell. In the article, Mr. Stell makes the case for qualitative, in addition to quantitative, analysis that [...]

A credit score based on credit bureau data is incomplete, a flawed concept when it is used in isolation to measure a borrower’s creditworthiness. How can you predict whether or not someone will pay a loan without considering all of the relevant facts? The credit bureau score is the most [...]

There is no dispute that credit scoring models work, based on what they set out to do — namely classifying historical samples of credit applicants with known performance into good and bad groups. We need to step back a bit from asking who is a predictable risk based on select [...]

There are different types of credit scores. Most generally there are credit bureau-based credit scores available from each of three primary credit bureaus (Experian, Equifax, and TransUnion) and there are also custom credit scores that may be developed either by a credit scorecard vendor or by the lenders themselves. Credit [...]