By: Kari Michel
This blog completes my discussion on monitoring new account decisions with a final focus: scorecard monitoring and performance. It is imperative to validate acquisitions scorecards regularly to measure how well a model is able to distinguish good accounts from bad accounts. With a sufficient number of aged accounts, performance charts can be used to:
• Validate the predictive power of a credit scoring model;
• Determine if the model effectively ranks risk; and
• Identify the delinquency rate of recently booked accounts at various intervals above and below the primary cutoff score.
To summarize, successful lenders maximize their scoring investment by incorporating a number of best practices into their account acquisitions processes:
1. They keep a close watch on their scores, policies, and strategies to improve portfolio strength.
2. They create monthly reports to look at population stability, decision management, scoring models and scorecard performance.
3. They update their strategies to meet their organization’s profitability goals through sound acquisition strategies, scorecard monitoring and scorecard management.
