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The Champion-Challenger approach allows using a new scorecard alongside the existing rules for credit risk assessment.
In the first stage of implementing a new scorecard, we need to check that it is superior to the existing methods of risk evaluation (or to the existing scorecard).
For that purpose, we process the majority of incoming loan applications using our existing methods (that are called Champion), while remaining loan applications are processed using the new scorecard (that is called Challenger).
Processed results are compared; if the new scorecard demonstrates a better assessment of borrowers, it will be used instead of old methods (and becomes the Champion method). If needed, the new scorecard is improved while it is in the Challenger mode, until we see an acceptable improvement in risk assessment.
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