Credit Risk Model: The Invisible Treasure
There is a parable about a beggar who had been sitting on a box by the side of the road for many years, asking passersby for change. Until one day a stranger suggested him to look inside of the box he had been sitting on. The box appeared to be full of gold.
Now, nobody wants to think of himself as a beggar. The parable is not about begging at all. The parable is not even only about discovering hidden opportunities. It is about having enough curiosity to question: “Where could a treasure be hidden?”. This question will not turn you into a beggar. But it will enable you to uncover hidden opportunities.
Many lenders are still using outdated and labor intensive methods to process loan applications and qualify borrowers. This results in extensive lead times in making a decision on a loan, missed opportunities in customer satisfaction and profitability, and in some cases, minimal profits and/or excessive risk in an organizations loan portfolio.
Scorto’s experts have summarized their ten years of experience to help financial institutions develop credit risk models. Credit risk models will help them glean most value out of available data and turn their risks into opportunities. The recently released white papers “Description of the generic scoring model ‘retail credit’ and recommendations on how to use it” and “Description of the ‘SME’ generic scoring model and recommendations on how to use it” establish a methodology on creating the generic scoring models and provide recommendations on applying these models.
Both white papers show how to use the scoring models not only in the process of loan underwriting but also to monitor borrower’s creditworthiness in the loan servicing process. The white papers explain how to deal with missing data, demonstrate how to combine subjective and objective characteristics of the creditworthiness of the enterprise; show how to apply scoring model and how to maintain it. This will show lenders how to approach loan origination and loan servicing in a new way and to uncover their hidden treasure – the historical data.
Sometimes it takes many years for a stranger to pass by and suggest that you explore the box you’re sitting on. Sometimes a few minutes is enough to ask yourself the right question. We at Scorto are committed to share our knowledge and help decision makers to uncover the hidden opportunities as quickly as possible.