Credit Scoring System

Understanding Credit Scoring in the Credit Manager

In our Credit Manager, credit scoring plays a vital role in determining how much you can borrow via shared credit and how favorable your borrowing terms will be. Here's an explanation of how it works:

Credit Score Basics

• Credit Score Range: Your credit score can range from a minimum of 250 (50% of the baseline) to a maximum of 850. This range mirrors common credit scoring systems, where higher scores indicate better creditworthiness.

• Starting Point: Every user begins with a baseline score of 500.

How Credit Scores Are Adjusted

• Score Adjustments: Your credit score is adjusted based on your actions, specifically:

  • Increases: When you make timely repayments, your score increases. The amount it increases by is called the scoreStep.

  • Decreases: If your borrowing behavior is risky (e.g., missing repayments), your score decreases.

• Impact of Time on Scores:

  • If a long time has passed since your last repayment, the scoreStep used to adjust your score might be reduced. This means:

    • Quick Repayments: Lead to a full scoreStep increase.

    • Moderate Delay: Results in a smaller increase or larger decrease.

    • Significant Delay: Minimizes the positive impact of repayments or maximizes the negative impact of missed payments.

Key Rules for Scoring

• Score Increases:

  • Your score will increase by the scoreStep amount when you make repayments, but it can never go above the maximum score of 850.

• Score Decreases:

  • If your score decreases, it will reduce by the scoreStep, but it will not fall below 250, which is 50% of the baseline score.

Time-Based Adjustments

• Why Time Matters: The longer you take to make a repayment, the less beneficial the scoreStep will be when your score is adjusted. This is to incentivize prompt repayment and active credit management.

• Adjustment Details:

  • Within Grace Period: No change in scoreStep.

  • Moderately Overdue: The scoreStep is halved.

  • Significantly Overdue: The scoreStep is quartered.

Example Scenarios

• Making Timely Payments: If you repay on time, your credit score will rise, improving your borrowing capacity.

• Delays in Repayment: If you delay your repayment, your score might not increase as much, or it might decrease more than usual, reflecting the increased risk.

Summary

Your credit score in our system is dynamic and reflects your borrowing behavior. By making timely repayments, you can maintain or improve your score, granting you better access to credit. However, delays or risky behaviors will reduce your score, limiting your borrowing potential. The system is designed to reward responsible credit management while penalizing inactivity or risky borrowing practices.