Portfolio Management
Behavior Scoring - Pro-actively monitor existing customers for repeat authorizations, credit line management and collectionsCredit Line Analysis - Set credit/lease lines utilizing credit capacity measures and credit scores
Existing Customer Credit Policy Consultation - Refine credit/collection policy for active customers
Behavior Scoring Models
Have you been looking for a portfolio management decision tool that saves you money, reduces operating costs, and increases overall department efficiency while lowering DSO and losses? Well you can stop looking. PredictiveMetrics (PMI) has an easy to use, cost-effective solution to help you pro-actively monitor existing customers’ future risk of delinquency and loss – A Statistical-Based Behavior Scoring Model.
What makes PMI’s behavior models superior is that we leverage internal performance data, data that is readily available; it’s free, and proven to be the most predictive since it is unique to your portfolio. Models built exclusively for existing customers’ that are primarily based on actual performance are much stronger predictors of existing customers’ future performance than models based on external bureau data only. Since most credit exposure comes from existing accounts, and the catalyst of a behavior model is internal data, it is extremely powerful in identifying and managing risk.
A Behavior Scoring Model has multiple applications including:
New Credit Authorizations for Existing Customers – Facilitates repeat business transaction decisions with current customers by evaluating the risk of future delinquency or loss reducing credit analysts’ review on routine transactions.
Credit Line Management - Expedites credit line increases and decreases by providing current evaluations of accounts, allowing quick decisions to be made.
Collections – Prioritizes collection activities by knowing which accounts are likely to go delinquent and which ones are not.
Due Diligence and Loss Forecasting – Provides an accurate summary of the condition of the entire portfolio for portfolio reviews supporting a timely due diligence process with scores being updated monthly, weekly, or even daily.
A PMI behavior model is empirically derived and validated using advanced multivariate statistical techniques to determine what information is relevant and how important it is to solve your business problem. The purpose of the statistical analysis is to find the most predictive set of data elements that separate the good credit risks from the poor credit risks. The output of the behavior model is the probability that an on-going account will become seriously delinquent, become written-off, experience bankruptcy, sent to a collection agency, or exhibit some other type of payment behavior over a specified period of time (behavior probability).
The output of the model is a score that can be used by itself to arrive at a decision or can be combined with other information to determine an existing customer’s credit rating. A behavior score is often supplemented with your credit and collection manager’s policy rules to create an enhanced level of back-end automation. The model is easily implemented in many different computer environments including encrypted Internet FTP.
Benefits of Behavior Scoring Models
- Reduce DSO, write-offs and losses
- Maximize new credit authorizations and credit lines on existing customers
- More effectively prioritize your collection queues
- No bureau data is required, which reduces data acquisition costs
- Score all accounts
- Minimize IT resources, no software required
- Multiple applications expands existing credit relationships
MORE INFORMATION ON BEHAVIOR SCORING
Credit Line Analysis
Optimize your credit lines by understanding your credit risk and financial strength. PMI works closely with you to determine the best credit and financial measure(s) for your portfolio. Once the measure(s) are determined, PMI analyzes credit and financial risk together and independently to produce statistical evidence of financially reliable credit line management. Univariate and multivariable statistical analyses are conducted to determine the relationship between credit and financial risk and setting credit lines. The end product is matrix of credit score/rating, representing the likelihood of payment, with an indicator of financial strength, representing capacity to pay.
Benefits of Credit Line Analysis
- Improve profitability by increasing credit line utilization on financially stable customers
- Offer flexibility to incorporate and optimize your expert rules to set credit lines
- Reduce delinquency and write-off rates by knowing the link between credit and financial risk
- Improve consistency and efficiency of credit line assignment
Existing Customer Credit Policy Consultation
The key components to an effective and efficient portfolio management strategy are technology, Information, knowledge-based statistical decisions, and on-going analytical support. Profitability of the portfolio requires knowing what combination of internal accounts receivable and external data best identifies risk in order to effectively refine credit policy. PMI provides immediate and actionable solutions to help you with their most pressing challenges in the management of you portfolio.Once PMI understands your existing account credit policy, business objectives, and systems capabilities and constraints, PMI offers expert recommendations. We provide consultation to refine policy in the following areas:
- Setting new credit authorization decision rules
- Dynamically changing credit lines
- Prioritization of collection activities
- Data optimization selection
- External bureau data economic justification
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