Credit risk evaluation: the application of scorecard in financial services

In recent years, credit risk evaluation and credit default prediction have attracted a great deal of interests from both practitioners and regulators in the financial industry. This paper reviews various methods in credit risk evaluation. We demonstrate the use of a scorecard in a bank and validate the performance of such a scorecard through analysis of scores derived from scorecard models. The promising results potentially provide benefit to the financial sector in the areas of credit judgement, loan securitisation and retail credit risk management.