Contents
What is reject inferencing?
A Reject Inference is a method for improving the quality of a scorecard based on the use of data contained in rejected loan applications. When developing a scorecard, we normally use information on those borrowers who have previously been granted a loan.
Why reject inference?
This makes the model more accurate, robust and unbiased. If applied correctly, reject inference methods help in increasing the approval rate, without compromising the credit quality. This paper outlines steps involved in some reject inference methods which can be used in the development of an acquisition scorecard.
Can reject inferences work?
Can reject inference ever work? The true good/bad status of applicants accepted for credit is ultimately known. In particular, we conclude that the distribution of the rejected applicants cannot assist reject inference unless additional assumptions are made.
What is through the door population?
Through-the-door population. All the applicants for any particular credit or financial product irrespective of the final accept/reject decision. Sometimes abbreviated to TTD population.
What is fuzzy augmentation?
Fuzzy augmentation — This method scores the rejects by using a credit scorecard model based on the accepts. These rejects are duplicated into two observations, where each is assigned a probability of being “good” or “bad,” and then aggregated to the accepts.
What is PSI in credit risk?
It is a metric to measure how much a variable has shifted in distribution between two samples over time. Originally, Population Stability Index (PSI) was developed to monitor changes in the distribution between an OOT and the development time period samples in the credit risk scorecard analytics.
How much PSI can a human take?
The body is a lot more resilient than you think. The human body can withstand 50 psi (pounds per square inch) and that’s if it’s a sudden impact. However if it’s sustained pressure, the body can withstand up to 400 psi if the weight is gradually increased.