Scorecards

A Scorecard is a statistical model for calculating a score for a borrower to establish the borrower's creditworthiness. You can configure scorecards to weigh an application consistently on multiple levels, for example, behavior, credit, or demography. In calculating the score, a range of data sources may be used, including the data from borrower’s application form, credit agencies, or from the products the borrower already holds with the lender. The scorecard results can be viewed in a report and analyzed.

Scorecard Set- With Q2 Origination you can configure a scorecard set that can consist of multiple scorecards.  A scorecard is evaluated based on the results of all the scorecards in a set. Configuring multiple scorecard sets and running them on applications is a very effective tool for credit risk managers to test and evaluate the outcomes.

Object-based Scorecards - You can define scorecards on the following objects:

• Application

• Account

• Party

Multi-party Scorecards - If you set up the scorecard on the Party object, the scorecard is generated for the application and also for each party associated with the application. When you generate scorecards for the application, the results are grouped by each Party for which the scorecard was generated, and also display the generation criteria (such as account, proprietorship), to make it easy to identify why the scorecard was generated. The selection criteria define which scorecard must be called. For example, to evaluate a corporation, the scorecard created for the legal entity type of Corporation can be called. 

Execution Criteria - In a scorecard, you can configure risk assessment criteria using the following options. These criteria, called execution criteria, form important considerations while evaluating an applicant and the eligibility for a funding. You can assign scores and further assign weights to these scores in order to prioritize the criteria. 

Scorecard Selection Criteria - You can define the criteria based on which a scorecard can be called

For example, the scorecard criteria can be applied where 90 days delinquency is < 1 on the borrower's credit report.You can also assume the user input itself as the score to evaluate a criterion. This is illustrated by the example that follows the procedure steps.

Once you have defined the execution criteria, you can define a logical expression (AND/OR) that governs the criteria. The Evaluation Expression for Execution configuration governs the execution order.

For example, if  you define four execution criteria:

• Criteria 1 - Asset Class = ‘Commercial Unsecured’

• Criteria 2 - Product = ‘Business Line of Credit’

• Criteria 3 - Product = ‘Working Capital Line of Credit’

• Criteria 4 - Loan Amount >= ‘500000’

Then, a sample expression could be: 1 AND (2 OR 3) AND 4. The system executes this as follows:  

Only execute if [Asset Class = ‘Commercial Unsecured’ AND (Product = ‘Business Line of Credit’ OR Product = ‘Working Capital Line of Credit’) AND Loan Amount >= ‘500000’]

Execution criteria also enable you to define the same scorecard criteria for multiple objects and create the execution expressions using different combinations of the criteria, as seen in the example above where the criteria are defined for  more than one product.

Setting up a scorecard

To start using a scorecard you need to set it up.

To set up a scorecard, do the following:

1. Define a scorecard set.

   To define a scorecard set, refer to Scorecard setup

2. Define a scorecard.

   Note:

   • To define a scorecard, refer to Scorecard setup

   • To define a rule-based scorecard, refer toRule-based scorecard setup

Example of User Input as Score

This example explains how user input is used as a score for evaluating a scorecard criterion:

Assume that borrower A has a credit score of 560 and number of years in job is 2. Whereas, borrower B has a credit score of 780 and number of years in job is 4.

If you do not select Use Input as Score 

If the criteria is met, then weighted score is score defined on the criteria multiplied by the weight.

If the criteria is not met, then the score is considered 0 and so the weighted score is 0. 

Sum of all the weighted score is the total score.

 If you select Use Input as Score

Weighted score = value specified by user * weight

In this type of scorecard, the application does not check if a criterion is met or not. The value of the selected field is multiplied by the weight to get the weight score. Sum of the weighted score is total score.

Field reference