Behavioural Credit Scoring

Credit scoring is an essential assessment tool in identifying creditworthiness of a client prior to obtaining approval from the lender. It raises a red flag if the assessment reveals potential credit default risks such as a bad debt history. However, potential risks are not exclusive to previous financial transactions or loan history, but rather personality characteristics and behaviour as well. In fact, frequently personality predicts financial behaviour and consequent credit rating.

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credit scoring process
credit scoring process

What is Behavioural Credit Scoring?

Traditionally, credit scoring has been calculated using mathematical algorithms based on the borrower’s credit history, demographics and financial circumstances. Lenders and other organisations use this information to evaluate the candidate’s potential credit default risk, using the credit score to mitigate their likelihood of losses occurring from bad debts. These credit scores are difficult to customise and may not be consistent with the risk tolerance or decision making style appropriate for the individual, context or company. Unlike traditional credit scoring, behavioural credit scoring uses psychometrics to examine personal attributes and behaviour to determine lending risk.

Behavioural credit scoring is more than just a look into a person’s past bank history; it is a holistic view of the personal attributes a person brings to the transaction to determine their eligibility for the loan they request. Does their likely future behaviour justify the risk involved? Behavioural credit scoring addresses this central question – prospectively. It enables a ‘look thru’ into the future, rather than the past.

credit scoring calculation

How is it used?

As a holistic approach in assessing creditworthiness, behavioural credit scoring uses psychometrics to develop a behavioural and personality profile of applicants. When combined with traditional scoring tools, it creates a more accurate scoring method of credit rating based on comprehensive data points to identify credit default risk. This identifies the most suitable applicants who have a greater likelihood of meeting their repayment obligations. Consequently, the business is more informed when making lending decisions and is better able to identify, and avoid, high risk loans, leading to greater financial return and security for lenders. Furthermore, the inclusion of such additional information available to lenders, allows for consideration of a wider range of potentially suitable applicants such as those that may not have an established credit history.

What is assessed?

In the same manner as mental stability is assessed for emergency services personnel, and clinical assessments are developed to diagnose mental illness; personal attributes, experiences and personality can be assessed to assist prediction of the preparedness to fulfil financial obligations. This is the essence of behavioural credit scoring. Research has demonstrated that biodata, personality characteristics and behaviours reasonably predict a person’s probability of engaging in risky financial decision making, supporting the application of this information within creditworthiness tests. In addition to traditional methods, some areas addressed by behavioural credit scoring include attitude toward risk taking, conscientiousness, emotional stability and work adjustment difficulties.

Incorporating a range of responses, a risk index can be compiled to indicate an applicant’s likely financial behaviour. While there is a strong evidence basis for the use of psychometrics, including personality and biodata characteristics, such behavioural credit scoring is designed to be used as a cumulative profile and not as the sole determinant in the decision-making process. It is used most effectively as an additional dimension in managing financial risk.

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Major benefits


Better predictions resulting in fewer credit defaults.


All aspects of behavioural credit scoring are incorporated within the one portal, resulting in increased efficiency when reviewing applicants.


The combination of behavioural and traditional credit scoring creates a more rigorous identification of risk.

Wider applicability

No credit history – often used in microfinance contexts where applicants have no credit history, behavioural credit scoring provides quantifiable data to assess creditworthiness or provide a credit rating or credit score.


Psych Press develops customised behavioural credit scoring applications to suit different target populations and types of transactions. Call centres can be provided with a scorable question list and see resulting credit ratings or credit scores in ‘real time’ whilst talking to the potential customer.

To learn more about the Credit Scoring System, and further discuss your needs, please contact one of our consultants: