Scorecard Development


A scorecard is a mathematical model that is used by an organization to assist them with the acquisition, management, and control of their customers. The development of a scorecard is a process by which data is extracted from an organizations database and collated for use in building the mathematical model.

There are many types of scorecards with each being used to meet a different business need. Examples of the most common types and uses for scorecards are as follows:

Application scorecards

  • Used for making decisions regarding which customers the organization accepts or declines, or for deciding what conditions to apply to the accepted applicant. The scorecard allows the organization to;

    • 1) automate the decision making part of the process

    2) objectify the decision making

    3) reduce the cost of signing up customers

  • Utilize data collected at the point that an applicant applies for credit. This may be personal details, credit bureau files, and/or customer verification data.

Behavioral scorecards

  • Designed to be used when making ongoing decisions around customer management. This might involve; decisions around the appropriateness of collections activity, identifying applicants for targeting during marketing campaigns, and the making of ‘on the spot’ authorization decisions.
  • Utilize payment history data collected during the time the customer has been with the organization.

Utilization scorecards

  • Built to identify which applicants are most likely to use a high amount of credit. If the credit risk of these customers is within acceptable limits, they may be the most profitable customers for the organization.
  • Can be built to apply either at the point of application or during account review periods.

Churn scorecards

  • Created with the objective of identifying which applicants are most likely to remain on the books for a long time and which are likely to move on quickly without the organization having time to recover the cost of signing up the customer.
  • Can be built to apply either at the point of application or during account review periods.

Profitability scorecard

  • Constructed to predict which applicants are most likely to be profitable for an organization. There are many dimensions to profitability which tend to make these scorecards a combination of the other core application scorecards. They utilize normal data available at the point of application with the most notable difference being the construction of the predicted variable – Profitability.