Credit scoring in the context of European integration: is there a future for generic models?

Traditionally, accept/reject decisions in consumer credit are based on credit scoring models empirically derived for a specific country/portfolio. Yet with the progress in E.U. integration lenders are faced with the necessity to assess the risk of multinational credit applicants which will require the use of innovative approaches. This paper explores one of such approaches by applying a single generic model to credit score populations of several European countries. In contrast to previous studies, the generic model is found to show an adequate classification performance, comparable to that of its national counterparts. Several practical problems associated with the use of a single model are discussed: the necessity to further harmonize data collection practices across the countries and implications for consumers.