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Introduction to Credit Scoring

With the recent economic crisis the importance of a reliable and well-formulated approach to developing scoring models and scorecards has been highlighted. Many organisations and business areas are introducing formalised credit scoring for the first time and reviewing existing scoring data and processes to better reflect credit in a downturn scenario.


This course teaches the business uses of scoring as well as the main methodologies for developing, validating and monitoring credit scoring models. It is designed to help participants understand the value of scoring as part of the credit process and introduce the most common industry techniques that are used.



Price: USD 1,050 per delegate

Book > 14 days in advance, only USD 900

Group discounts available: please enquire




  • Location:  Hong Kong
  • Upcoming dates: Please enquire

This 1 day introductory course is led by highly experienced industry practitioners. Our trainers are professional risk managers and consultants who are actively involved in risk projects within the financial services industry. They will provide many practical examples and case studies to aid understanding of credit scoring techniques and how these are used in practice.


COURSE SUMMARY


The course offers both a business and technical introduction to the implementation of a credit rating model within an organisation. This course provides a thorough overview of the main techniques used in the financial industry for the development of models, and how best to manage design and implementation of a model for a business line.


The applications of scoring and the uses of different approaches, such as application and behavioural scoring, will be explained. The importance of historical data availability and quality will be discussed and the main techniques in use for model building, including decision tress, logistic regression and neural networks will be explained. Practical examples and demonstrations using appropriate software will also be given.


The expert course tutor will give an overview of how an organisation can best go about selecting techniques for model build, and then integrating the model into the organisation to deliver maximum benefit. A multi-stage process that an organisation could base such an implementation on will be introduced, and the tutor will share experiences of implementing models in organisations globally.



What is Credit Scoring?


Credit scoring uses statistical measures of historic customer credit performance to predict future performance.


The main use historically for credit scoring is within a bank's credit and loan department. Models derive relationships between applicant information and the probability of a repayment, using historical empirical data. Credit scoring techniques and scorecards can be used as an objective risk management tool, which help ensure more consistent and reliable credit management.


The same scoring techniques are increasingly being used for a much wider variety of applications, including Basel II models, assessment of fraud in payment transactions, or the prediction of the likelihood or repayment being achieved in a collection case.


WHO SHOULD ATTEND?

  • Heads of Risk Management, Credit Risk or Credit Management
  • Credit Managers and analysts
  • Professionals in the areas of collections, fraud analysis, payment processing and leasing who are interested in the applications of credit scoring
  • Project Managers
  • Risk management professionals and consultants
  • IT and Information Security Managers

Detailed Course Syllabus


PART A: INTRODUCTION TO CREDIT SCORING

What is credit scoring

What can and cannot be achieved with credit scoring

Introduction to the scorecard

Use and adoption of credit scoring


PART B: SCORECARD DEVELOPMENT FRAMEWORK

Application and behavioural scoring

Good / Bad discrimination

Process for scorecard development

Data extraction and integrity

Data for model development. Practice and validation sets

Data cleaning. Missed values


PART C: BUILDING THE SCORING MODEL

Different techniques for building a model

Statistical and judgemental scorecards

Expert Systems

Decision Trees

Logistic regressions

Neural nets


PART D: MODEL VALIDATION TECHNIQUES

Forecast ability, validation of variables and Information Value

Measures of discrimination - Gini coefficient and ROC


PART E: DESIGNING A RATING MODEL FOR AN ORGANISATION

Business objectives

The impact of the Basel Accord on scoring models

Six step process for designing, implementing and monitoring a rating model within an organisation