Method and apparatus for generating segmentation scorecards for evaluating credit risk of bank card applicants

• US 6,202,053 B1
• Filed: 01/23/1998
• Issued: 03/13/2001
• Est. Priority Date: 01/23/1998
• Status: Expired due to Term

• Current Assignee: Bank One Delaware National Association (JP Morgan Chase & Co)
• Original Assignee: First USA Bank N.A. (JP Morgan Chase & Co)
• Inventors: Christiansen, James, Srinivasan, Krishnakumar, Kolhatkar, Jayashree Santosh, Fatnani, Sangita
• Primary Examiner(s): Stamber, Eric W.
• Assistant Examiner(s): Kazimi, Hani M.
• Application Number:
  US09/012,231
• Time in Patent Office: 1,145 Days
• Field of Search: 705/38, 705/39
• US Class Current: 705/38
• CPC Class Codes: G06Q 20/10 specially adapted for electronic funds transfer [EFT] systems; specially adapted for home banking systems
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

The present invention is a method and apparatus that uses a plurality of predetermined segments to group credit applicants to evaluate each applicant'"'"'s credit risk. The segments are based on at least one of reported trades, reported delinquency, bank card utilization, and length of said credit history. A score is generated for each applicant based on a unique scorecard designed for each segment The unique scorecards allow more accurate credit risk assessment by evaluating each applicant in view of that segment'"'"'s tendency to be bad credit risks.

Claims

1. A computer implemented method for evaluating credit risk of bank card applicants comprising the steps of:

a) dividing a population of bank card applicants into a plurality of sub-populations using a processing unit, based on a first factor selected from a factor group consisting of length of credit history, number of reported trades, reported delinquency, bank card utilization, and revolving balance acceleration;

b) dividing at least one of said sub-populations into additional sub-populations based on a second factor selected from the factor group, the second factor being different from the first factor selected from the factor group;

c) developing a scorecard for each of said plurality of sub-populations and additional sub-populations;

d) applying one of said scorecards to a bank card application; and

e) scoring said application, based on said applied scorecard.

2. The method of claim 1 wherein the step of dividing includes dividing said population of bank card applicants into a first sub-population and a second sub-population, said first sub-population includes applicants with fewer than 3 trades and said second sub-population includes applicants with more than 2 trades.

3. The method of claim 2 wherein the step of dividing includes dividing said second sub-population into a third sub-population and a fourth sub-population, said third sub-population includes applicants with no reported delinquencies in a preceding six month period and applicants with delinquencies of less than 60 days, said fourth sub-population includes applicants with reported delinquencies within a preceding six month period and applicants with reported delinquencies of more than 60 days.

4. The method of claim 2 wherein the step of dividing includes dividing said third sub-population into a fifth sub-population, a sixth sub-population, and a seventh sub-population;

said fifth sub-population includes applicants with less than 25% bank card utilization;

said sixth sub-population includes applicants with 25% to 75% bank card utilization; and

said seventh sub-population includes applicants with more than 75% bank card utilization.

5. The method of claim 1 wherein said score is based on at least one of each applicant'"'"'s reported trades, reported delinquency, bank card utilization, and length of credit history.

6. The method of claim 4 wherein the step of dividing includes dividing said fourth-sub-population into an eight sub-population and a ninth sub-population, said eighth sub-population includes applicants with less than 40% bank card utilization and said ninth sub-population includes applicants with more than 40% bank card utilization.

7. The method of claim 6 wherein the step of dividing includes dividing said seventh sub-population into a tenth sub-population and an eleventh sub-population, said tenth sub-population includes applicants with more than 10 years of credit history and said eleventh sub-population includes applicants with less than 10 years of credit history.

8. The method of claim 7 wherein the step of dividing includes dividing said ninth sub-population and a thirteenth sub-population;

said twelfth sub-population includes applicants with more than 10 years of credit history and said thirteenth sub-population includes applicants with less than 10 years of credit history.

9. The method of claim 3 wherein the step of dividing includes dividing said third sub-population into a fifth sub-population, a sixth sub-population, and a seventh sub-population;

said fifth sub-population includes applicants with less than $35 of balance acceleration;

said sixth sub-population includes applicants with between $35 and $135 of balance acceleration; and

said seventh sub-population includes applicants with more than $135 of balance acceleration.

10. The method of claim 9 wherein the step of dividing includes dividing said fourth sub-population into an eighth sub-population, a ninth sub-population, and a tenth sub-population;

said eighth sub-population, includes applicants with less than $40 of balance acceleration;

said ninth sub-population includes applicants with between $40 and $110 of balance acceleration; and

said tenth sub-population includes applicants with more than $110 of balance acceleration.