Credit Risk Scorecard Design, Validation and User Acceptance

Credit risk scoring has gone a long way since Fair Isaac introduced the first commercial scorecard to assist banks in making their credit lending decisions over 50 years ago. It now becomes the cornerstone in modern credit risk management thanks to the advancement in computing technologies and availability of affordable computing power. Credit scoring is no longer only applied in assessing lending decisions, but also on-going credit risk management and collection strategies. Better designed, optimally developed and hence more powerful credit risk scorecard is a key for banks and retail finance companies alike to achieve competitive advantage in today’s competitive financial services market under the tough economic environment with severe consumer indebtedness. Several books have been published which serve as a good introduction to credit management and scoring. [1-4]