Regulators stress the importance of model validation

May 15, 2012 by josephine.munis

As part of its expanded guidance, the Office of the Comptroller of the Currency explicitly recommends that financial services firms utilizing predictive models and decision analytics run regular validations to gauge model efficacy.

VantageScore 2.0 was recently measured against the best credit score models from each of the three largest credit reporting companies (CRCs). When comparing KS values, there is exceptionally strong performance for mortgage originations, with VantageScore 2.0 outperforming the CRC models in a range from 8 percent to 12 percent. The average range of outperformance is 3 percent to 4 percent across the board for most of the key industries.

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Source: Executing Effective Validations, American Banker.

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