Scoring

What is Credit Scoring ?

Credit scoring is a statistical modeling procedure that can be used to predict a customer’s future behavior based on his/her past behavior. Each customer will be evaluated based on his or her past payment history, credit bureau information etc and the scorecard will be calculated for future reference.

Types of Scoring

Credit scoring is widely used in many consumer credit management areas, serves different business objectives. Types of credit scoring can be classified as the following:

From consumer credit life cycle, scoring can have the following types: application score, behavior score, collection score, etc.

From management areas, scoring can have response score, delinquency score, default score, write-off score, sales score, revenue score, profit score, activation score, attrition score collection score, revolving score and bankruptcy score, etc.

From data source, scoring can have bank internal score, credit bureau score, demographic score, survey data score, etc.

The Benefits of Scoring

One of the major characteristics in consumer finance is its big volume, small loan size when compared to commercial lending. To efficient process credit application, credit line management, it needs a tool to deal with the volume, not individual. Scorecard is the tool to solve the volume issue by managing and controlling statistical characteristics of credit portfolio.

Consistent decision making is another benefit of using scoring. Human judgment can be varied with all possible factors, affecting the decision consistency accordingly. Scoring is the objective tools that replace or reduce errors.

Accuracy is one of the benefits that scoring can bring on board. Since it is based the data and statistical approach, the prediction is much more accurate than subjective estimate.

Objectivity is also a benefit. Because of the recognized methodology and common data approach, the scoring is treated as an objective tool to evaluate and compare the quality of different credit card portfolio.

Speed of assessment. Scoring is done automatically and evaluating the selected factors simultaneously. So its speed is much faster than human being evaluation. Therefore the customer service get great improvement.

Help the marketing and customer management more easily than before. For instance, with risk score, banks can avoid these high risk customers in their marketing campign. With better predict the probability of customer attrition, profitability, as well as risk, banks can do better job in cross-selling, implementing appropriate strategies.

CRF’s Best Practice

CRF has the best modeling team that its core team members were trained in the top US financial institutions. Its adviser board members came from senior executives in American Express, Discovercard, Mastercard, Visa and first Capital. With its proprietary scoring technology, CRF has intensive scorecard development and implementation experience in Chinese local market. Its scorecard system is used for credit line management, collection management, as well as underwriting new accounts in major Chinese banks’ credit card management. It has profound positive impacts on our clients credit card portfolio performance according to clients’ tracking report.

CRF closely works in partnership with our clients, understanding their business requests, discuss the results and validations with our clients.

For further information on credit scoring services please contact CRF.