The Art of Credit Scorecard Development: Guide and Implementation: Part 1 — Introduction

Introduction

Credit scores are important when you want to borrow money. Think of your credit score like a report card for your money habits. It shows how trustworthy you are with money. Your score is a number that tells lenders how likely you are to pay back what you borrow. The score is calculated based on various factors such as loan payment history, length of credit history, individual financial status, industry-specific factors, and other times external data such as social behavior data.

Throughout this series, we’ll explore the fundamental aspects of creating effective credit scorecards. Part 1 will focus on understanding the business context and preparing data, while Part 2 will encompass all preliminary techniques preceding scorecard creation using Toad Package. Finally, Part 3, will finalize with model and scorecard development.

Factors prompting the utilization of scorecards

• Increased regulation mandating robust risk assessment and credit evaluation processes.
• Need for standardization and consistency in credit assessment across organizations.
• Desire to improve efficiency and streamline lending processes.