Validating Consumer Credit Risk Models: What Methods Are Relevant to Assuring Your Model's Stability in a Volatile Business Environment

Abstract

This Financial Insights report details why a validation is essential, the appropriate steps to carry out a validation analysis, and who the business constituents are that rely on validations and also details what we mean by model "performance."

"As the global economy struggles in recession, lenders across industry verticals should closely track and validate their scoring models. During economic times of rapid expansion and contraction, scoring models can degrade in their ability to make optimal loan recommendations. Sound population and scorecard tracking and validation practices are part of a robust enterprise risk management program." - Dana Wiklund, research director, Global Risk Management