What is a scorecard?

What is a Scorecard?

Credit scorecards are mathematical models which attempt to provide a quantitative estimate of the probability that a customer will display a defined behaviour i.e. how likely is that person/company to default on loan repayments or go bankrupt.  It is based on the borrowers current or proposed credit position with a lender.  Scorecards are built to evaluate information on a company or individual and will review various data such as (but not limited to):

• Previous payments to other lenders (banks, mobile phone companies, insurance companies, hire purchase companies, loan companies etc.)
• Did the person default or not?
• How much was the loan for?
• How long did the borrow the money for?
• The number of loans current and pas
• Fraudulent IDs – is this the real id of the borrower?
• Age, income, where do they live.

The credit score is a numerical expression based on the level of analysis of a person’s credit files, to represent the creditworthiness of that person. It is based on very complicated probability/estimations which are built into the system.  This score ranks clients by riskiness without explicitly identifying their probability of default.  Individual lenders have specific criteria which they choose to include in the models which make up the credit score.