General Motors Financial Co. Inc. (formerly AmeriCredit Corp.), along with other subprime auto finance companies, has long claimed that its proprietary credit scoring models are better than FICO scores at predicting subprime auto loan portfolio losses. Unlike FICO scores, which primarily reflect borrowers' prior credit behavior, proprietary scores can incorporate additional variables, such as borrower income, the amount of down payment, and loan-to-value (LTV) ratio. For this reason, proprietary credit scores can provide a more complete picture for assessing the likelihood that a borrower might default and the resultant losses among subprime asset-backed securities (ABS) transactions. We recently conducted a statistical analysis to determine if GM Financial's proprietary credit scores have been more powerful in predicting losses on the company's...
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Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.