Credit Scoring: Is It Right for Your Bank?
By Dean Caire and Robert Kossmann
The following material was prepared by Dean Caire and Robert Kossmann while
working for Bannock Consulting on a Technical Assistance engagement funded by
the European Bank for Reconstruction and Development and the European Union.
For more information, please contact Greta Bull, Greta_Bull@Bannock.co.uk, phone:
(0)20 7535 0200, Bannock Consulting, 47 Marylebone Lane, London, W1M 6LD.
CREDIT SCORING: IS IT RIGHT FOR YOUR BANK?
This paper is not intended to be a step-by-step manual of the tasks required to
implement a credit scoring system in your bank – because banks operate in different
environments, have different procedures and policies, and sell credit products
differently, such a manual would probably result in more questions then it would
answer. Instead, this document aims to provide you with a road map of the steps in
we recommend in designing, implementing and monitoring a custom credit scoring
We hope that by considering the basic steps outlined herein and augmenting this
knowledge with other available literature about credit scoring you will be able to:
1. Determine whether credit scoring is right for your bank.
2. If “yes,” begin the process of implementing a scoring model into your bank.
While credit scoring could be a valuable teaching and risk management tool in
virtually any bank setting, it is probably low on the totem pole of priorities in banks
with more fundamental underwriting problems such as inexperienced loan officers,
seriously inadequate procedures, persistent arrears problems, etc. If that is the case in
your bank, for now you might want to keep scoring in mind as a goal for the future.
The remainder of this paper assumes that this is not the case, that your bank has sound
underwriting procedures, an adequate MIS system and therefore could potentially