In my last blog we covered some additional guidance around product strategies for auto decision small business loans. In this final blog, we will cover the long-term requirements to make auto decisioning a sound, foundational piece of your risk management strategy.
Auto Decision Is Not “Set It and Forget It”.
- Once you have the requisite number of requests and are auto decisioning, the real work begins! It is important to have the correct reports in place. Any reports you do for your portfolio, like delinquency, charge-off, approval percentages, score analysis, etc. will need to be done separately for the auto decisioned products.
- The goal is to make sure the auto decisioned portfolio is behaving the same as the manually underwritten portfolio. Compare delinquencies and other behaviors to see if they are in line.
- It will be important to also perform a validation of the portfolio on an annual (or every 18-24 months) basis. A portfolio validation is a comparison of the scores to your actual portfolio performance. This is the only way to know if the scorecard is predictive for your portfolio. Most institutions hire a scorecard company, like Fair Isaac or Experian, to perform this analysis.
Hopefully this has been insightful for those looking at auto decisioning. We are here to help! Reach out to your Account Executive for additional information and to answer any questions.
