With consumer bankruptcy filings still high and competition putting a squeeze on credit card profitability, an Atlanta firm is marketing a refined version of its computer models for assessing bankruptcy risk.

MDS, a major provider of credit and marketing programs, has developed a new method of applying its bankruptcy models, which were first introduced in 1987. Bankers at the MDS booth at the recent American Bankers Association national bank card, conference in Washington were showing strong interest.

The new system enables bankers to combine their existing risk tools with one of three MDS models, each based on data from one of the three leading credit bureaus.

|An Incremental Benefit'

"The behavioral score that issuers are using alone has X amount of benefit, and the bureau score used alone has X amount of benefit, but used together, issuers can realize an incremental benefit," a spokeswoman for MDS said.

Bankruptcies cost card issuers $2.65 billion in 1992, according, to the Nilson report, so there is plenty of room from incremental savings if a system can accurately predict bankruptcies.

Indeed, there is some evidence that such models, including competing products offered by Fair, Isaac & Co. of San Rafael, Calif., already are having an impact.

Bankruptcy Filings Dropping

"I would attribute some of the, decline in bankruptcies to the effectiveness of such models," said Robert W. Johnson, senior, research associate at the Credit Research Center at Purdue University.

Although consumer bankruptcy filings are at a very high 852,306, they are going down, he pointed out. In the 12-month period ending June 30, bankruptcies fell by 5.28%.

"Also," Mr. Johnson said, "banks are updating their scoring for current customers more! frequently, at least once a year or every nine months," as opposed to once every two years, he said.

Standard Score Limited

MDS has been aggressively promoting its "dual-tool" method since last spring. The firm says it will help bankers to in on accounts likely to cause the highest losses - and cut off credit where warranted to avert a looming crisis.

MDS notes that the standard behavioral score that banks use to assess current accounts measures only how a customer has been managing accounts with the bank. By adding the credit bureau score, the issuer can see how the customer has been handling other debts. That would enable the banker to respond if it seems the customer is feeling pressure that ultimately will cause a default on the bank's seemingly solid relationships.

MDS officials said the dual scoring method also enhances the bank's ability to assess potential new customers. It can help evaluate the wisdom of rewarding a particular customer with an increased credit line, among other tasks.

Using the standard behavioral scores, customers who are likely to file for bankruptcy look very similar to the most profitable card holders, MDS officials note.

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