Time varying or static cut‐offs for credit scorecards

This note points out that the ability of credit scorecards to separate Goods from Bads changes over time. A simple way of dealing with such changes is to adjust the cut‐off scores being used. These adjustments can be made by using the score to log odds relationship which is regularly monitored. In a case study there are decreases in the costs–in some case considerable decreases–of using the scorecard by making such adjustments compared with making no adjustments.