Algorithm for explaining credit scores

US 7,280,980 B1
Filed: 07/30/2001
Issued: 10/09/2007
Est. Priority Date: 08/01/2000
Status: Active Grant

First Claim

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1. A method for explaining credit scores, comprising the steps of providing a Web site that contains informative resources, said Web site comprising any of for-pay services and extranet/Internet functions;

offering consumers access to information contained in said informative resources, the resources being, both general and personal, about practices comprising any of collection, storing, reporting, and evaluating consumer credit data;

accepting consumer credit scores and reason codes from individual consumers or third parties, in interactive or batch modes; and

providing an explanation report to said individual consumers based upon the individual consumers'"'"' credit scores, said method for explaining credit scores further comprising the steps of;

defining a credit score as a function of prediction characteristics;

defining a surrogate set of characteristics as representing areas for improvement;

developing a surrogate score to approximate a real credit score, using said real credit score as a performance (dependent) variable and using said surrogate characteristics as predictors; and

defining a potential improvement metric for each area for improvement;

wherein said developing a surrogate score step further comprises the step of;

using said areas for improvement prediction variables to develop a surrogate score of the form
ψ

(z₁, z₂, . . . , z_p),which is developed using z₁, z₂, . . . , z_pas said prediction characteristics and
Y=ζ

(X₁, X₂, . . . , X_c)as said performance variable; and

wherein said defining a potential improvement metric step is defined as;

$\begin{matrix} I_{k} = 100 \times \frac{\max_{z_{k}} {ψ (z_{1}^{*} (z_{k}), \dots, z_{k}, \dots, z_{p}^{*} (z_{k})) - ψ (z_{1}^{*}, \dots, z_{k}^{*}, \dots, z_{p}^{*})}}{{Score}^{*}} \\ = Maximum possible percent improvement in score for Area of \\ Improvement k, \end{matrix}$ where z₁^*(z_k)=z₁^*unless z₁^*cannot coexist with z_k, wherein in that case, z₁^*(z_k)=E[z₁|z_k], or some other value of z₁that can coexist with z_k.

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Abstract

An exemplary Web-based score explanation service typically requires only the credit bureau identifier, credit score, and up to four reason codes as input. The invention herein discloses an algorithm that is used to provide an explanation of the primary factors influencing the score, where a rich data feed is provided to the facility implementing the algorithm.

159 Citations

13 Claims

1. A method for explaining credit scores, comprising the steps of providing a Web site that contains informative resources, said Web site comprising any of for-pay services and extranet/Internet functions;
- offering consumers access to information contained in said informative resources, the resources being, both general and personal, about practices comprising any of collection, storing, reporting, and evaluating consumer credit data;
  
  accepting consumer credit scores and reason codes from individual consumers or third parties, in interactive or batch modes; and
  
  providing an explanation report to said individual consumers based upon the individual consumers'"'"' credit scores, said method for explaining credit scores further comprising the steps of;
  
  defining a credit score as a function of prediction characteristics;
  
  defining a surrogate set of characteristics as representing areas for improvement;
  
  developing a surrogate score to approximate a real credit score, using said real credit score as a performance (dependent) variable and using said surrogate characteristics as predictors; and
  
  defining a potential improvement metric for each area for improvement;
  
  wherein said developing a surrogate score step further comprises the step of;
  
  using said areas for improvement prediction variables to develop a surrogate score of the form
  ψ
  
  (z₁, z₂, . . . , z_p),which is developed using z₁, z₂, . . . , z_pas said prediction characteristics and
  Y=ζ
  
  (X₁, X₂, . . . , X_c)as said performance variable; and
  
  wherein said defining a potential improvement metric step is defined as;
  
  $\begin{matrix} I_{k} = 100 \times \frac{\max_{z_{k}} {ψ (z_{1}^{*} (z_{k}), \dots, z_{k}, \dots, z_{p}^{*} (z_{k})) - ψ (z_{1}^{*}, \dots, z_{k}^{*}, \dots, z_{p}^{*})}}{{Score}^{*}} \\ = Maximum possible percent improvement in score for Area of \\ Improvement k, \end{matrix}$ where z₁^*(z_k)=z₁^*unless z₁^*cannot coexist with z_k, wherein in that case, z₁^*(z_k)=E[z₁|z_k], or some other value of z₁that can coexist with z_k.
- View Dependent Claims (2, 3, 4, 5, 6)
- - 2. The method of claim 1, further comprising the step of:
    - creating an ordered areas for improvement table.
  - 3. The method of claim 1, further comprising the step of:
    - using said surrogate characteristics as said areas for improvement.
  - 4. The method of claim 1, wherein said defining a credit score step is defined as:
    - Score=ζ
      
      (x₁, x₂, . . . x_c),
5. The method of claim 1, further comprising the steps of:
- associating a set of reason codes with a score returned from a credit bureau;
  
  associating a score difference with each reason code;
  
  providing a data feed which includes score differences associated with said reason codes; and
  
  coverting score differences to percentages.
6. The method of claim 1, further comprising the step of:
- comparing a current score to a maximum score that can be obtained by varying said prediction characteristic.

7. A credit score explanation system;
- comprising a Web site that contains informative resources, said Web site comprising any of for-pay services and extranet/Internet functions;
  
  said Web site offering any of consumers and said third parties access to information contained in said informative resources, the resources being both general and personal, about practices of any of collection, storing, reporting, and evaluating consumer credit data;
  
  a mechanism for accepting consumer credit scores and reason codes from any of individual consumers or third parties, in interactive or batchmodes; and
  
  providing an explanation report to said individual consumers based upon the individual consumers'"'"' credit scores an apparatus for explaining credit scores comprising;
  
  means for defining a credit score as a function of prediction characteristics;
  
  means for defining a surrogate set of characteristics as representing areas for improvement;
  
  means for developing a surrogate score to approximate a real credit score, using said real credit score as a performance (dependent) variable and using said surrogate characteristics as predictors;
  
  wherein said developing a surrogate score step further comprises;
  
  using said areas for improvement prediction variables to develop a surrogate score of the form
  ψ
  
  (z₁, z₂, . . . , z_p),which is developed using z₁, z₂, . . . , z_pas said prediction characteristics and
  Y=ζ
  
  (X₁, X₂, . . . , X_c)as said performance variable; and
  
  means for defining a potential improvement metric for each area for improvement;
  
  wherein said means for defining a potential improvement metric step is defined as;
  
  $\begin{matrix} I_{k} = 100 \times \frac{\max_{z_{k}} {ψ (z_{1}^{*} (z_{k}), \dots, z_{k}, \dots, z_{p}^{*} (z_{k})) - ψ (z_{1}^{*}, \dots, z_{k}^{*}, \dots, z_{p}^{*})}}{{Score}^{*}} \\ = Maximum possible percent improvement in score for Area of \\ Improvement k, \end{matrix}$ where z₁^*(z_k)=z₁^*unless z₁^*cannot coexist with z_k, wherein in that case, z₁^*(z_k)=E[z₁|z_k], or some other value of z₁that can coexist with z_k.
- View Dependent Claims (8, 9, 10, 11, 12, 13)
- - 8. The apparatus of claim 7, further comprising:
    - means for creating an ordered areas for improvement table.
  - 9. The apparatus of claim 7, further comprising:
    - means for using said surrogate characteristics as said areas for improvement.
  - 10. The apparatus of claim 7, wherein said means for defining a credit score comprises:
    - Score=ζ
      
      (x₁, x₂, . . . , x_c),
11. The apparatus of claim 7, wherein said developing a surrogate score step further comprises:
- means for using said areas for improvement prediction variables to develop a surrogate score of the form
  ψ
  
  (z₁, z₂, . . . , z_p),which is developed using z₁, z₂, . . . , z_pas said prediction characteristics and
  Y=ζ
  
  (X₁, X₂, . . . , X_c)as said performance variable.
12. The apparatus of claim 7, further comprising:
- means for associating a set of reason codes with a score returned from a credit bureau;
  
  means for associating a score difference with each reason code;
  
  means for providing a data feed which includes score differences associated with said reason codes; and
  
  means for converting score differences to percentages.
13. The apparatus of claim 7, further comprising:
- means for comparing a current score to a maximum score that can be obtained by varying said prediction characteristic.

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Current Assignee
Fairisaac and Company Incorporated
Original Assignee
Fair Isaac Corporation
Inventors
Hoadley, Bruce, Rosenberger, Larry E., Flint, Andrew
Primary Examiner(s)
Fischer; Andrew J.
Assistant Examiner(s)
MILEF, ELDA G

Application Number

US09/919,074
Time in Patent Office

2,262 Days
Field of Search

705/35, 705/38
US Class Current

705/38
CPC Class Codes

G06Q 40/00   Finance; Insurance; Tax str...

G06Q 40/02   Banking, e.g. interest calc...

G06Q 40/03   Credit; Loans; Processing t...

Algorithm for explaining credit scores

First Claim

1 Assignment

0 Petitions

Accused Products

Abstract

159 Citations

13 Claims

Specification

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Algorithm for explaining credit scores

First Claim

1 Assignment

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Subscription Required

0 Petitions

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Accused Products

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Abstract

159 Citations

13 Claims

Specification

Subscription Required

Solutions

Use Cases

Quick Links