Definition of bank scoring
The so-called bank scoring is an evaluation system used by banks and financial institutions to determine the viability of a client to receive a loan, credit, mortgage or insurance. It comprises a series of economic, demographic and financial data of the person.
The idea behind this system is to establish a series of specific criteria that allow a reliable analysis of the payment capacity, income and credit history of a given person. Therefore, it includes specific information that comes from the person’s historical activity with other institutions.
As these are systems that banks and institutions adopt as they find most convenient for their needs, the type of system used and the data it includes can vary widely. The largest institutions have automated systems with standardized criteria.
The implementation of this type of system dates back to the 1970s, when the expansion in the supply of financial products allowed greater access to this type of service. During this time and the following ones, this type of practices became popular and started to be implemented as a standard to check scoring.
How bank credit scoring works
The functioning of the bank scoring system is decentralized; institutions access different databases -such as the ASNEF file- from which they retrieve data on individuals and their financial characteristics. In general, anyone applying for a loan or credit must first have a positive credit score.
Current scoring systems base their operation on analysis algorithms that process the data and cross-references to determine a specific score that indicates whether or not it is viable to offer the service. The information available to them is updated every time the person performs a banking or financial operation.
The financial scoring systems present different categories according to the type of service requested: consumer or personal, mortgage, business, etc. Each of them requires different types of data and conditions which, depending on each activity, represent critical risk points for the entity offering the service.
How is credit scoring calculated?
As this is such a significant point, it is very important to check our score before applying for any financial and banking service. If I am looking for how to know my bank credit score, the options are varied; from telephone or mail consultation to a visit to your bank in person. However, the most convenient option turns out to be the bank credit score simulator.
In Spain, you can also consult your credit history in the Central Risk Information Center of the Bank of Spain (CIRBE). This database registers all the information corresponding to the loans and credits previously contracted by individuals and used by financial institutions for risk management.
The fastest and most effective way to perform the consultation is the scoring simulator, as it simply requires internet access and the completion of a form. In case of any error or failure in the consultation, you can also use any of the options or resort to the site’s technical assistance.
How does it influence when taking out a loan or mortgage?
As mentioned so far, this bank evaluation system is fundamental for access to most traditional financial services. Its importance is less significant depending on the type of service and the chosen lender. For example, in the case of personal loans, a negative credit score often does not disqualify the person.
In the case of larger services, such as a larger loan or a mortgage, a positive scoring will be almost mandatory to obtain the approval of the bank or institution. Since it is a commercial activity, the person can negotiate the contracting of the service by offering collateral or guarantees of different types that reduce the risk of granting the loan.
Is it possible to improve my current credit scoring?
The only way to improve one’s bank credit score is by complying with payment conditions and improving one’s economic capacity. In this sense, regular compliance with financial obligations or access to better working conditions – salary, seniority, hierarchy or position – can considerably improve my current score.
Among the most effective actions to improve our score is the payment of outstanding debts, without incurring in delinquencies or instances of claims. On the other hand, the level of financial expenditure can be controlled: it should not exceed 30% of total income. Finally, very frequent or simultaneous contracting of financial and banking services should be avoided.
Access to quality financial services is essential to achieve a better standard of living and to solve personal or professional projects. Therefore, it is always recommended to consult a bank scoring simulator to know our financing options.