Senior Honors Projects, 2010-2019

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Date of Graduation

Spring 2016

Document Type


Degree Name

Bachelor of Business Administration (BBA)


Department of Finance and Business Law


Kayti Schumann


There are many underbanked Americans who struggle to obtain financing due to poor credit or no credit. Credit score is the primary measure used in the United States to determine credit worthiness, however there are many problems with credit score. Credit score may not be an accurate representation of risk and it can be manipulated. In addition, many Americans do not have a credit score. Some companies are beginning to use alternative measures to underwrite, but there are no published studies on using this method for subprime auto loans. This paper examines the potential alternative measures that Auto Capital, a finance company that extends credit for the purpose of financing automobiles for subprime consumers, could use in addition to credit score in its underwriting model. Several alternative measures were tested, selected based on non-standard underwriting models in use and on the data available. These alternative measures are time-at-job, time-at-residence, down payment, payment ratio, and disposable income. Of these measures, only down payment and payment ratio were the significant predictors of loan repayment for the subprime population.



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