Odds are all around us. Flip a coin, the odds are 50% that you'll come up heads. With your new scorecard in hand, you'll know the precise odds that your applicant, customer, or potential lead will perform whatever it is you need to predict. The answer lies in your data, and we'll teach you how to reveal its secrets! Odds are you'll love it!
If you're like most credit professionals, whether you're contemplating an irreversible approval, or some other type of credit-based decision, you're well aware of the important decision before you. So like so many times before, you set out with an open mind and scan the strengths and weaknesses of your applicant to guide you in this all important decision.
Time to hit your favorite variables to see what you've got. For some, it's a combination of gross monthly income, time in residence, and FICO score; for others, it's time on the job, high performing credit, and loan-to-value. You probably scan the credit report and determine the overall balance of credit, payment performance, time in bureau, and whatever else your experience and well-seasoned intuition tells you to analyze.
But what if I told you, your favorite 5 variables ranked #11, #32, #67, #112, and #168 in the top 200 most predictive variables in your tool box. I bet you'd really like to know the top 10! And I'll bet you a dollar you can't guess your #1! This is just one of the powerful techniques you'll learn as we embark on your scoring project. You'll walk away with tips and techniques you can use elsewhere in your overall risk management platform. We'll touch on topics of pricing, product-tier selection, and other areas where scores can play an important role within your organization.
If you've ever had to set some sort of business rule based on finding just the right break points for a given variable, you've probably wondered if you picked exactly the right breaks. For example, maybe you have a policy that requires an increasing amount of down payment when the job time is <5 years, <3 years, and <1 year respectively. How did you come up with those breaks? They probably seem appropriate, but are they really optimal?
The challenge of course is to identify points where the risk takes a dramatic leap or decline. Break point optimization is a critical part of any decision-making platform. Sadly, this all important process is often done judgmentally and this is costing your organization money—plain and simple. As they say, knowledge is power and we'll teach you a simple and effective way to set optimal break points for every situation in your decision platform. This simple technique is tried and true, and just another of the many useful techniques you'll take away as we teach you how to develop scorecards.