Credit Kudos recently announced their latest scoring metric – Income Stability Scores. The newly introduced scores utilise open banking data to help streamline manual underwriting - meaning less delving into income transactions - and automate nuanced income verification decisions.
The three scores - Amount Consistency, Regularity and Longevity - represent the nature of an applicant’s income - how long-lived it is, how consistent the amount is and how regular it is, enabling lenders to get a much more holistic understanding of the applicant’s income. It allows you to build nuanced income stability rules: for example you could accept an income of £1200 if it has high stability, but require an income of £1500 if consistency, regularity or longevity was low.
Each score has been developed from the analysis and segmentation of tens of thousands of income sources, as well as information collected from lenders about how they assess and verify income. Each recurring source of income, benefits or pension has stability scores, along with labels to help the lenders interpret them. In addition, each report has an overall score based on a holistic view of all their income sources.
Amount Consistency helps lenders understand how the income source varies in amount – taking into account how often it varies and by how much. Both consistency of transactions and consistency of monthly totals are scored, then the highest of these is used. For example, if an applicant’s weekly pay-packets vary but they always take home the same amount every month, the applicant’s Amount Consistency score will be high.
Regularity represents the predictability of the source’s payment dates. It can be read as the confidence level of our prediction of the next payment date: a monthly income source with a Regularity score of 90 means we are 90% sure the next payment will be exactly a month after the last. A low regularity score might mean the payment has, say, a weekly periodicity - but many weeks are missed - or that there are no discernible patterns at all.
Longevity scores the income source on the length of time for which it’s been seen. Breaks in the income source, such as a missing month in a monthly salary, will be reflected in the score: an income source with a 12-month streak will score higher than one seen for 12 months with a missing payment 6 months ago. Payments since a break are counted in full and payments before a break contribute half as many points to the score.
To find out more about our Income Stability Scores or how you can use Open Banking to make faster and better credit decisions, you can get in touch with use here.