Yearly renewal of calculation methodology for borrowers‘ creditworthiness rating
Every year, team of NEO Finance is updating the calculation methodology for borrowers‘ creditworthiness rating.
The methodology employed by NEO Finance is unique in a sense that it has been developed internally, by the team. It has been led by Marius Navickas, Member of the Board and investor of the company. Marius is a Chartered Financial Analyst (CFA), one of the leading experts in credit risk management in Lithuania, holding a considerable experience in the sphere.
Here are the reflections of Marius on the renewal of the rating calculation methodology:
We are constantly striving to develop the calculation methodology for borrowers‘ creditworthiness rating. Every single renewal considerably increases the accuracy of the creditworthiness rating. This year, by taking into account the information accumulated throughout 2018, we will employ more variables that indicate risk while calculating creditworthiness rating of the borrowers.
This way, we will be able to grant the creditworthiness rating even more accurately. Therefore, ultimately, we will be able to reduce the number of default loans issued via NEO Finance platform.
Based on our evaluation, after the renewal, the following likely default rates should hold: approx. 1.6%, approx. 5.6% and approx. 15.2% for A, B and C ratings, respectively. The overall default rate should hold at approx. 7.5%. I would like to clarify that these percentages reflect the possibility of the borrower becoming insolvent, i.e. the possibility that their payments will be late by more than 90 days in the period of 12 months.
Therefore, after evaluating the loss of selling default loans with discounts, the investors can come up with more accurate forecasts of their return rate, relied on the creditworthiness rating. In addition, this enables them to select the loans to invest more accurately, as their likely return rate will be satisfactory for that particular investor.
Should you have any questions, do not hesitate to contact us.
Good luck with your investments!