|
The statistical scorecard reflects the existing interrelations between different borrower characteristics.
That is why, its quality is directly dependent both on the predicting capacity of the borrower characteristics in use and the combination of these characteristics that takes part in the process of development.
When developing a scorecard, we can use either all of the available borrower characteristics,
or only those characteristics that are the most important from the point of view of forecasting the borrower's creditworthiness:
When we select the most important characteristics, each of them is considered as a candidate for participating in the scorecard and can be included or excluded from the final set of characteristics.
Forward stepwise selection starts with an empty set of borrower characteristics, extending it with the most important characteristics.
Backward stepwise selection initially uses all borrower characteristics and excludes insufficiently meaningful ones.
In every practical case, the selection of the method for the development of the scorecard depends on the number of available borrower characteristics and their forecasting ability.
In any case, the best reason for selecting one method or another is the quality of the resulting scorecard.
|
previous
