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One of the main conditions for successful use of the scorecard is the absence of significant changes in borrower characteristics over the course of time.
If the development of the scorecard lasts for a long time, changes in the credit portfolio may occur. Since such changes are not reflected in the data that were used to develop the scorecard, then prior to the implementation of the scorecard into the process of evaluating a borrowers’ creditworthiness, we need to re-check that the quality of the scorecard remains the same and to remove any deviations, if any.
To determine the presence of changes in borrower characteristic, we use the Population Stability Index (PSI), that allows finding differences between the expected and actual borrower characteristics in all the selected risk ranges:
In the given example PSI=0,1082, which corresponds to insignificant changes in borrower characteristics.
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Plug&Score is the most easy-to-use and the fastest to integrate scoring system.
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For more complex and versatile needs of larger credit institutions we recommend Scorto™:
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