A statistical technique to enhance application scorecard monitoring

Nico Kritzinger and Gary van Vuuren

Journal of Credit Risk

Abstract: Application scoring plays a critical role in determining the future quality of a lender’s book. It is therefore important to monitor the performance of an application scorecard to ensure it performs as expected. Attention has so far been focused on application scorecard modeling and assembly techniques. An area that has received less consideration is application scorecard implementation. Performance measures on the accepted population appear to change in predictive power after the implementation of an application scorecard. This paper introduces and demonstrates a statistical measure to track the performance of the accepted population after the point of implementation on a comparable basis against the development window of the application scorecard.

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