Safety and Soundness and Compliance Issues on Credit Scoring Models

Credit scoring models, or score cards, can contribute to bank safety and soundness as long as bank management actively participates in the development, implementation, monitoring, and validation of the model. Operational factors, such as accurate implementation of the credit scoring model and adequate training of data input staff, also can have an impact on the effectiveness of models. Changes in the environment in which a bank operates can affect the predictive ability of a credit scoring model over time. For all these reasons, a credit scoring model's performance must be analyzed regularly. This section describes several issues on which examiners and bank management should focus to ensure effective use of scoring models.