Comments on: A reader asks about scorecards and why people use them

By: James Taylor

James Taylor — Thu, 14 Aug 2008 19:02:35 +0000

Well the regulations say things like “increasing age must not be used to penalize borrowers” or “if something improves your odds as it increases in one range it cannot be used to penalize you beyond that range”… Clearly some of them relate to score cards but they are also general purpose regulation.

By: Dave Dixon

Dave Dixon — Thu, 14 Aug 2008 19:00:05 +0000

If regulations are not in terms of credit score, then I’m not sure I understand why the scorecard makes for easier validation by regulators. We can still include business rules as part of the decision model. In fact, they may be more transparent, because they can be expressed in terms of relevant “real world” quantities/variables/decisions that regulators may be familiar with, rather than wrapping this up as a “score”.

By: James Taylor

James Taylor — Thu, 14 Aug 2008 15:35:24 +0000

The regulations were certainly in place before credit scoring became widespread but I don’t know the dates specifically. The regulations are not scorecard specific though, you have to conform to them even if you don’t use scorecards.

By: Dave Dixon

Dave Dixon — Thu, 14 Aug 2008 15:31:17 +0000

Hi James. One quick question on regulation: did regulations on credit scoring get put in place before or after the development of credit score models?