Collections Stream at CCR-interactive

1. The Psychology of the Borrower

2. Understanding People
1. Observation
2. Explanation
3. Prediction
4. Change

3. The Ideal (Unreal) Data
0
10
20
30
40
50
60
70
80
90
100
10 20 30 40 50 60 70 80 90 100
Scanscore(reliability)
Probability of Default (%)

8. What do you see?

9. • IQ tests used in 1919 to recruit and train fighter
pilots in WW2
Correlations of g and military performance
Technical proficiency .63
General soldiering .65
Effort and leadership .31
Personal discipline .16
Physical fitness and military bearing .20
Source: Adapted from McHenry et al. (1990)

10. Psychometrics
I like to live everyday to its
fullest
1= Strongly Disagree / 5 = Strongly Agree
I like to do things on the
spur of the moment
1= Strongly Disagree / 5 = Strongly Agree

11. Personality
HEALTH
Intrinsic
dispositions:
anger
mistrust
Risky
behavioral choices
smoking
drugs
Prevention
& reaction
visits to doctor
treatment
-
-
+
A (-), N (+)
C (-), N (+)
C (+)
Note. A = Agreeableness, N = Neuroticism, C = Conscientiousness, + = positive
influence, - = negative influence

12. Relationship Success
Ahmetoglu, Swami, and Chamorro-Premuzic (2009).

13. - Martin, Friedman & Schwartz, 2007

15. Lothian Birth Cohort 1932, linked with the Midspan Collaboration Study, N = 243; assessment ages between 11
and 50 years (Deary et al., 2005, Intelligence).
IQ predicts SES 39 years later

17. Predicting Default?
I like to live everyday to its
fullest
1= Strongly Disagree / 5 = Strongly Agree
I like to do things on the
spur of the moment
1= Strongly Disagree / 5 = Strongly Agree

18. ©2011 Hogan Assessment Systems 18
(Prudence items):
1. I frequently do things on
impulse.
2. People think I’m a non-
conformist.
3. I like to do things on the
spur of the moment.
4. I never know what I will do
tomorrow.
5. Sometimes I enjoy going
against the rules.
True False
 
 
 
 
 
“I am a fun,
spontaneous
individual that
looks forward to
starting each day
with a clean slate,
ready to meet
whatever
challenges life has
to offer.”

19. ©2011 Hogan Assessment Systems 19
(Prudence items):
1. I frequently do things on
impulse.
2. People think I’m a non-
conformist.
3. I like to do things on the
spur of the moment.
4. I never know what I will do
tomorrow.
5. Sometimes I enjoy going
against the rules.
True False
 
 
 
 
 
“He tends to be
inattentive to
details, resist
supervision,
ignore small
process steps, not
plan ahead, and
rarely think
through the
consequences of
his actions”.

20. Credit Risk Assessment

24. Personality and debt
Risk propensity is
a robust predictor
of debt holdings
beyond the Big
Five personality
traits and
demographic
variables.
(Daly, Delaney, & McManus, 2010)

25. General anxiety scores are significantly related
to personal financial behaviours, such as:
1. Difficulty in paying bills due to inadequate income
2. Spending beyond earnings
3. Reaching the maximum spending limit on credit cards
Sages, Britt, & Crumbie (2013)

26. Money attitudes, in
particular ‘anxiety’ and
‘power and prestige’ are
associated with defaulter
behaviour. Bhardwaj & Bhattacharjee (2010)

27. Personality traits linked
to financial problems
Locus of control
Self-esteem
Impulsivity Materialism

28. What do these tell us?
• Files with delinquencies,
• Files that have very little information
• Income/house owner
• Payment history
• Debt
• Time in file
• Account Diversity
• Public record entries

30. A
B
C
D
E
F
G
Support/Resources
Support/Resources
Support/Resources
Support/Resources
Support/Resources
Support/Resources
Support/Resources
Algorithm
Vulnerabilities
Behavioural
propensities
Capabilities

31. Prudent Imprudent
Responsible Irresponsible
Cautious Impulsive
Cooperative Uncooperative
Relaxed Anxious
Sociable Detached
Optimistic Pessimistic
Responsible Irresponsible
High risk of late
or non-payment
Low risk of failure
to maintain property
Next steps
Next steps

32. Profile Risk Next steps
Imprudent Imprudent people tend to not think about the
consequences of their actions and for this reason
they often prioritise the wrong things in their life.
They are likely to be spenders rather than savers;
and when they spend money it is likely to be on
luxuries rather than necessities.
Try to understand the applicant’s real financial position –
what are their other outgoings, do they have outstanding
debts they need to service etc… Help the applicant build a
realistic budget that will allow them to meet their
financial responsibilities
Irresponsible The applicant is not a wholly irresponsible person
but may, on occasion, behave irresponsibly. As
such, they may not always be organised and
conscientious when it comes to meeting their
responsibilities as a tenant.
Help the applicant understand exactly what their financial
responsibilities as a tenant will be. Regularly remind the
applicant of their responsibilities and of important dates
and deadlines.
Impulsive People who are impulsive find it difficult to
exercise self-control. Like imprudent people they
are likely to be spenders rather than savers. They
are also more likely to get into financial
difficulties because they give in to their appetites.
Discuss with the applicant things that they enjoy spending
their money on, in order to identify ways in which they
could save money. The goal is to get the individual to
understand how they can still enjoy their life while also
living within their means.
Uncooperative The applicant is capable of being uncooperative
and stubborn but is not consistently so.
Appeal to the cooperative side of the applicant’s nature by
clearly explaining the importance of cooperation and
communication. Agree how you are going to communicate
and agree a timetable of regular communication.
High Risk of late or non-payment

33. Impulsive
• People who are
impulsive find it
difficult to exercise self-
control. Like imprudent
people they are likely
to be spenders rather
than savers.
• They are also more
likely to get into
financial difficulties
because they give in to
their appetites.
• Discuss with the applicant things
that they enjoy spending their
money on, in order to identify
ways in which they could save
money.
• The goal is to get the individual to
understand how they can still
enjoy their life while also living
within their means.
Profile Risk Next steps

35. 3,000 data points in 25 minutes!
Do you always aim for the same spot?
How long do you take between decisions?
What happens when you fail early on?
How hard do you pull the catapult?
How much risk are you comfortable with?

37. In conclusion
• Risk = some degree situation / large degree
character
• Psychological profiling predicts default beyond
credit scores
• And can tell us how to deal with a character

38. Human psychology

39. Thank you
gorkan@metaprofiling.com