Paper

Exploding the Myths of Scorecard Development

Road map for developing a good model of scorecard
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This paper discusses the misconceptions that exist in a model development of scorecard. The paper aims to:

  • Explode these myths;
  • Understand the problem that the scorecard is trying to solve.

The author discusses the following minutiae for developing a good scorecard model:

  • Identify the business problem for which the model is needed;
  • Provide performance definition that highlights what the model is going to predict;
  • Hit upon an early measure of a write off stage so as to minimize bad debt;
  • Use the concept of indeterminates to differentiate the good and bad patterns in the data;
  • Realize that changes in the measures of predictive model can be done by changing the design of the model;
  • Select characteristics so that it can be implemented in the life system.

The paper:

  • Explains need for inclusion of bureau information stating that although using them provides certain uplift, they must not dominate the scorecard.
  • Details out the concept of reject inference whereby declined applications are inferred to ensure that the future scorecard caters to all risk profiles on which the organization makes a decision.
  • Concludes that the success of any model will depend on the design of the actual business issue and the understanding applied by the developers and end users.

About this Publication

By Neves, E.
Published