Posted by MeridianLink | May 25, 2022

When a Credit Score Is Just a Number

Every financial institution understands the importance of making better credit decisions, and solutions that promise to increase efficiency to optimize auto-decisioning and minimize risk are a top priority. With new solutions that incorporate AI lending models and a new way of scoring promising to provide best-in-class credit models coming to market every day, the options can be overwhelming!

While terms like AI and machine learning sound like the wave of the future, they may not live up to their promises. The methodology used to calculate a score, whether it uses traditional multivariate regression or more modern neural networks, will give you very minimal lift if you’re not analyzing the bigger decisioning picture. The truth is, without evaluating multiple elements to optimize your decisioning process, a credit score is just a number.

Just one piece of the puzzle

Analyzing decisioning data from multiple angles, including risk, operations, collateral, offering, channels, and more, is key to designing an origination strategy which will increase value for your Institution. And while credit scores built with proprietary models can be an importance piece of your strategy, they are just one part of a comprehensive solution for lending.

A truly optimized decisioning strategy starts by analyzing and optimizing additional elements like behavioral and transaction data and application data. It includes a set of rules that are unique to your institution, with thresholds that will be applied before and/or after the score cut-offs. In addition, it is important to continually monitor and adjust the elements that create the score and decisioning strategy to continually improve, including validation of the score and ongoing data analysis on the decisioning, charge-offs, interest inflow, etc.

Optimize decisioning using more than a credit score

With a truly optimized decisioning process, financial institutions can increase efficiency, decrease risk, and better serve their communities through an improved lending experience for customers and members. And conducting a deep dive decisioning optimization analysis as well as monitoring activity will see greater results than using a standalone “new” score.

So, what are the key features you should look for in a decisioning solution? Look for solutions that offer more than just a score upgrade. The most effective decisioning strategy includes the score as just one of many important variables, including:

  • A deep dive data analysis, including exploratory data analysis to determine the most predictive variables for each product and credit risk tier.
  • Simulate multiple decisioning scenarios, creating a new decisioning structure based on the evidence discovered through the data analysis
  • Develop a custom scorecard derived from your population’s specific risk characteristics vs. a generic credit bureau score

MeridianLink Consulting’s Analytics team offers the expertise and comprehensive solution you need to optimize your decisioning with more than just a score.

Learn more at or request a consultation today.

Similar Posts