---
title: "The composite read: three numbers against warehouse bands"
url: https://lendriskanalytics.com/tool.html
publisher: LendRisk Analytics
kind: Page
description: "The full arithmetic of a three-input composite read for auto lending books: annualised loss rate, 90-plus-day delinquency, and weighted-average FICO scored 0-100 against standard warehouse covenant bands, with every threshold and weight published as a reference table."
html: https://lendriskanalytics.com/tool.html
---

# The composite read: three numbers against warehouse bands

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Methods · Note 05
Method note · 6 min read

Method note · Composite scoring

# The composite read: three numbers against warehouse bands.

LendRisk Analytics · Method note · 2026

A warehouse facility does not read a book the way its owner does. It reads a short list of covenant tests: a cap on annualised losses, a trigger on severe delinquency, a floor under borrower quality. This note publishes the full arithmetic of a 60-second composite read built on exactly those three numbers, scored 0 to 100 against the bands standard facilities write. This page previously hosted an interactive version of the calculation; the method is the useful part, so the method is now the page.

40 pts

Weight on loss rate (NCO), the realised economic loss

30 pts

Weight on severe lates (90+ DPD), the leading indicator

30 pts

Weight on borrower quality (weighted-average FICO)

70

Composite level where the read turns to at-risk

## Three numbers, one score

The composite takes the three numbers every auto lender already tracks and blends them into a single 0-100 read. **Loss rate** is annualised net charge-offs: for every $100 lent, the dollars that are permanently gone after the vehicle was repossessed, auctioned, and came up short. A 9% NCO means $91 recovered and $9 destroyed. Fitch's subprime auto index printed 9.81% annualised in January 2026, already inside the 8-10% cap range that standard warehouse facilities write. **Severe lates** is loans 90 or more days past due as a share of the active book, the leading indicator that more losses are coming. TransUnion's industry benchmark was 3.8% in Q4 2024; warehouse trigger levels commonly sit at 4-6%. **Borrower quality** is the weighted-average credit score across the active book; standard facility terms put the floor somewhere between 560 and 590.

## The arithmetic, in the open

The score is one line of algebra. Each input is normalised to a 0-1 scale against a fixed denominator, multiplied by its weight, and summed:

score = 40 × (NCO ÷ 12) + 30 × (DPD ÷ 10) + 30 × ((700 − FICO) ÷ 200)

Each ratio is capped at 1, and the total is clamped to 0-100 and rounded. The weighting follows covenant priority order: NCO is the primary economic loss metric, DPD is the forward indicator, and FICO is the credit-quality floor.

| Input | Weight | Normalisation | Safe | Watch | Breach-level |
|---|---|---|---|---|---|
| Loss rate (NCO, annualised) | 40 pts | NCO ÷ 12% | The full parameter set of the composite. Per-metric bands are calibrated to the Fitch NCO print (9.81%), standard warehouse caps (8-10% NCO), the TransUnion delinquency benchmark (3.8%), warehouse delinquency triggers (4-6%), and standard FICO floors (560-590).

**Inference**The denominators are themselves judgments. Scaling NCO against 12% says that a book running at the January 2026 Fitch index level has already consumed roughly 82% of the loss dimension of the scale. Measuring FICO as distance below 700 across a 200-point band treats a move from 690 to 680 the same as a move from 570 to 560, which real credit risk does not. The normalisation is defensible as a covenant-distance measure; it is not a risk model.

## Three synthetic books, scored

The mechanics are easiest to see worked through. All three books below are **synthetic and illustrative**; the stressed book uses the default preset values from the original interactive version.

| Synthetic book | NCO | 90+ DPD | WA FICO | Component points | Composite | Tier |
|---|---|---|---|---|---|---|
| Clean book | 3.50% | 2.50% | 610 | 11.7 + 7.5 + 13.5 | 33 | Covenant safe |
| Drifting book | 6.00% | 4.00% | 585 | 20.0 + 12.0 + 17.3 | 49 | Watchlist |
| Stressed book | 9.30% | 6.90% | 578 | 31.0 + 20.7 + 18.3 | 70 | At risk |

Synthetic worked examples. Note the drifting book: no single input is at breach level, yet it lands mid-watchlist. The composite is designed to catch books that look tolerable metric by metric but are deteriorating on all three axes at once.

## Reading the bands

The composite maps to three tiers. Below 40, the book is comfortably inside the covenant bands. From 40 to 69, one or more metrics is drifting toward a threshold: watchlist territory, where direction matters more than level. At 70 and above, at least one dimension has typically crossed a line that facilities write into covenants, and the economics of the book are under direct pressure.

Composite tier bands, 0-100

The three tiers of the published scoring arithmetic, with the 56 mark where the original diagnostic began assuming forward stress projections.

Tier boundaries from the published arithmetic: safe below 40, watchlist 40-69, at-risk 70 and above.

Two disclosures about the original interactive version, for completeness. First, it carried a soft internal flag at a composite of 56: above that level, the diagnostic assumed a warehouse bank was already running forward stress projections on the tape. Second, it displayed three benchmark-styled variants of the score, labeled Fitch, S&P Global, and TransUnion, computed as fixed multiples of the same composite (0.92×, 1.05×, and a delinquency-only 1.1× respectively). Those were presentational restylings of one number, not independent data feeds, and they should be read that way.

**Inference**The 56 flag encodes a market observation rather than a covenant: banks model the slope, not just the point. A book that moves from 45 to 56 over three quarters is, in this framing, already the subject of internal forward projections even though no covenant has tripped. That is an interpretive claim about lender behaviour, consistent with how facility monitoring generally works, but it is not written in any facility document.

## What three numbers are enough for

Three numbers are enough to answer one question well: *which side of the bands does this book sit on, and how much room is left?* That is genuinely useful. It is the difference between preparing for a covenant conversation this quarter and discovering one has been scheduled for you. A book owner who walks into that conversation with their own vintage curves and roll rates is in a different position than one who waits for the bank to arrive with theirs.

The read
A three-number composite is a **triage instrument**. It tells you where a book stands relative to the covenant bands in about a minute. It does not tell you **why** the book is there, **which direction** it is moving, or **what is driving** the drift. The honest use is sequencing: the score tells you whether pulling the vintage curves and roll-rate tables is a today problem or a this-quarter problem.

## Limits

What this method cannot see, stated plainly. It has no vintage view: cohort-level deterioration surfaces six to nine months before it moves the portfolio aggregate, and a blended NCO hides it entirely. It has no roll rates: the 30-day bucket today predicts the 90+ bucket in two months, and the composite reads neither. It is denominator-blind: an annualised NCO on a fast-growing book understates true vintage losses, because new originations dilute the base before they have had time to default.

Two structural limits matter most. First, **the bands here are calibration midpoints, not anyone's contract.** Actual covenant levels vary facility by facility; a real threshold is whatever the facility documents say it is. Second, **facilities test covenants one at a time, and a weighted blend can mask a single-metric breach.** A book at FICO 555 with pristine losses can score under 40 on this composite while sitting below a hard floor. Near any line, the per-metric status matters more than the blend. And the score itself is a weighted heuristic calibrated to public benchmarks, not a model fitted to loan-level data: an indicative read, not a measured probability. The anchors are date-stamped prints, Fitch January 2026, TransUnion Q4 2024, and they drift.

**Sources & notes**
Calibration anchors are those stated on the original calculator: the Fitch subprime auto ABS index (net charge-offs of 9.81% annualised, January 2026 print), the TransUnion industry 90+ day delinquency benchmark (3.8%, Q4 2024), the S&P Global rated-deal NCO series, and standard warehouse facility terms (8-10% NCO caps, 4-6% delinquency triggers, 560-590 FICO floors). The composite is a weighted heuristic calibrated to those public benchmarks, not a model fitted to a proprietary loan dataset. All worked examples in this note are synthetic and illustrative; they describe no actual lender. LendRisk Analytics is an independent research publication with no position in, and no affiliation with, any company mentioned. Not investment, legal, or accounting advice.

Have a question about the market, or a different view? [Send it through →](https://lendriskanalytics.com/contact.html).

LR

LendRisk Analytics

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