Intelligent Credit Scoring

A better development and implementation framework for credit risk scorecards

Intelligent Credit Scoring presents a business-oriented process for the development and implementation of risk prediction scorecards. The credit scorecard is a powerful tool for measuring the risk of individual borrowers,  gauging overall risk exposure and developing analytically driven, risk-adjusted strategies for existing customers. In the past 10 years, hundreds of banks worldwide have brought the process of developing credit scoring models in-house, while ‘credit scores' have become a frequent topic of conversation in many countries where bureau scores are used broadly. In the United States, the ‘FICO' and ‘Vantage' scores continue to be discussed by borrowers hoping to get a better deal from the banks. While knowledge of the statistical processes around building credit scorecards is common, the business context and intelligence that allows you to build better, more robust, and ultimately more intelligent, scorecards is not. As the follow-up to Credit Risk Scorecards, this updated second edition includes new detailed examples, new real-world stories, new diagrams, deeper discussion on topics including WOE curves, the latest trends that expand scorecard functionality and new in-depth analyses in every chapter. Expanded coverage includes new chapters on defining infrastructure for in-house credit scoring, validation, governance, and Big Data.

Black box scorecard development by isolated teams has resulted in statistically valid, but operationally unacceptable models at times. This book shows you how various personas in a financial institution can work together to create more intelligent scorecards, to avoid disasters, and facilitate better decision making. Key items discussed include:

• Following a clear step by step framework for development, implementation, and beyond
• Lots of real life tips and hints on how to detect and fix data issues
• How to realise bigger ROI from credit scoring using internal resources
• Explore new trends and advances to get more out of the scorecard

Credit scoring is now a very common tool used by banks, Telcos, and others around the world for loan origination, decisioning, credit limit management, collections management, cross selling, and many other decisions. Intelligent Credit Scoring helps you organise resources, streamline processes, and build more intelligent scorecards that will help achieve better results.

NAEEM SIDDIQI is the Director of Credit Scoring and Decisioning with SAS^® Institute. He has more than twenty years of experience in credit risk management, both as a consultant and as a user at financial institutions. He played a key role in developing SAS^® Credit Scoring and continues to provide worldwide support for the initiative.

In-house scorecard development is not only a rapidly growing trend, it is also faster and less expensive, and enables companies to create better-performing scorecards by applying firsthand knowledge of internal data and business insights. Intelligent Credit Scoring takes you beyond the technical part of building scorecards and shows you how to apply business intelligence to the process in order to solve business problems. This extensively updated and expanded Second Edition incorporates the latest best practices and advances into its flexible framework for end-to-end development and implementation of risk-prediction scorecards. Specifically written for heads of risk modeling, credit risk managers, scorecard developers, and CROs operating in the real world, this highly practical guide features new cases and fresh voices from a variety of companies all over the world, diagrams and up-to-date examples of binning and bias detection using Weight of Evidence (WoE) curves, and more in-depth analysis in every chapter. By taking a business-oriented approach to the scorecard, a variety of people throughout the financial institution can contribute their insights to generate a dependable, customized tool for accurate risk avoidance and enhanced decision making. One of the most powerful features of this framework is the risk profile, which integrates predictive variables into the scorecard in order to replicate the thought processes of skilled risk adjudicators. In addition to optimizing your bottom line, the framework is also designed to produce scorecards in full compliance with Basel II requirements. If you still keep the first edition on hand for everyday practice, this revised edition will quickly take its place for providing: A behind-the-scenes look at how the end-to-end process plays out in the real world using sample data All-new coverage on producing an end-to-end infrastructure for scorecard development, governance, and integration Detailed coverage of how to validate and manage vendor-built scorecards Intelligent Credit Scoring, Second Edition is your one-stop solution for maximizing your intelligent resources, streamlining processes, and building smarter scorecards for achieving business results.

PRAISE FOR INTELLIGENT CREDIT SCORING "Siddiqi offers a contemporary, stepbystep guide to developing and implementing successful inhouse credit scorecards. He sets out the key concepts in an ordered and simpletofollow fashion, supported by insightful worked examples. A mustread for anyone in risk management responsible for credit scoring." Jonathan Baum , Chief Credit Officer, Lloyds Banking Group "Siddiqi's book is a mustread for anyone looking to develop scorecards in house, or who just needs a refresher on technique. Consumer Portfolio Services has benefitted tremendously from the knowledge and insights gained within these pages. I highly recommend this book as your trusted companion while on your educational journey into scorecard development!" Rick Haskell, SVP of IT and Risk Management, Consumer Portfolio Services "The author presents an integrated framework for development of Internal Scoring/Rating System for assessment and measurement of Credit Risk that really helps for implementation of Basel II IRB approach and IFRS9 credit risk modeling." Javed H. Siddiqi, Bsc(Hons), Msc(Physics), MBA(Finance), Head of Risk Management, Soneri Bank "A great read for anyone interested in the evolution of credit scorecard development in the banking industry. Naeem also provides an expert view of the scorecard development process, usage, implementation, and the importance of monitoring. This book is an informative read for experienced and novice scorecard developers alike." Daniel Bonomo, Vice President, Retail Risk Models, Scotiabank "This is a timely and detailed update of the original edition, since the art and science of credit scoring has developed significantly. This edition retains its appeal to users given its simple to understand language, whilst covering complex technical content. The coverage of validating generic scorecards is relevant since in many locations customized scorecards may not be feasible." Satinder Pal Singh Ahluwalia, Micro Business Director, PT Bank Danamon Indonesia, Tbk "In this new edition, Naeem continues to offer very practical approaches and ideas which are pertinent now more than ever to financial institutions of various sizes. Organizations will find useful tools in this book to help them improve their development, use, and understanding of credit scoring models even if they aren't developing their own. This book is a must for every professional credit risk manager." Sylvain Fortier, CERA, ASA, Vice President and Chief Risk Officer, UNI Financial Cooperation

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