Prescio Consulting was retained to review the theoretical development of a major Midwestern bank behavior scorecard model for their unsecured business line portfolio.

Our approach for this project included reviewing the bank’s theoretical development and subsequent implementation of the model. The bank followed the methodology outlined by Siddiqi in “Credit Risk Scorecards: Developing and Implementing Intelligent Credit Scoring.” The approach included a logistic regression model to train the model coefficients and subsequently used the coefficients to develop the scorecard values. We then assessed the bank’s back testing and sensitivity analysis/stress testing of the model.