Is credit scoring based on big data analytics fair and accurate?

How market research sparked debate in Germany on the effectiveness of credit scoring.

By GP Forschungsgruppe, a German social science and market research institute.


Assess the reliability of data collection and profiling

In Germany, credit registrations offices use big data as part of their analysis to determine individuals’ financial situation, this information is then communicated to banks to inform their decisions about credit applications. GP Forschungsgruppe conducted a number of studies to determine whether that information was reliable.


Online survey and in-depth interviews

This issue has been studied for nearly a decade. The starting study was carried out in 2005, with a mystery shopping study of 40 participants at 4 different banks asking for credit of 10,000 euros and comparing the interest rates given. This was followed by a study in 2008, when the four major credit registration offices were asked for the credit values of 100 participants to compare the information stored about them.


In 2014, an online survey with 2,000 participants and in-depth interviews with stakeholders was conducted to gauge the impact of new legislation and assess the new situation of the financial market. 

So what?

New credit protection legislation

The first two surveys showed the weakness of credit scoring practices: in some cases, one bank would deny credit to participants, while others would have no problem lending it to them. It was also found that between 24% and 51% of the data stored about each customer by the registration was either incomplete or wrong.

The results of the original studies prompted public debate in Germany, and were eventually used to inform new legislation as well as recommended new measures to further improve the current regime and respond to rising issues, such as profiling.

These studies were a very powerful tool to allow government services and regulators to have empirical data about the scope and reach of an important societal issue, and the effectiveness of their public policy, whilst providing suggestions for the way forward.