BankersLab Blog

Ask Gini: Building Predictive Models – Strap on a Hard Hat

Dear Gini,

I’m in collections and our first payment defaults are very high. Are there predictive models I can build to prevent this? What should I do?

Thanks,

George

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Dear George,

Oh dear, I suspect somebody has not been taking care of boring operational stuff over at your shop, and prefers to hide out behind their monitor tinkering with models!

Don’t despair – there may be a straightforward solution to your woes, as long as you are ready to roll up your sleeves and strap on a hard hat!

First, talk to the collectors who handle the first payment default collection queue. If you aren’t handling them separately, crack on and set that up!

If you are handling them separately, speak with the collectors who are managing those accounts. Can they spot a pattern that the address or phone number is not being entered correctly when the loan is booked? We’ve seen cases where the field on the application form is so small that it’s impossible to legibly write the address.

If a pattern emerges – get yourself down to the operations and data entry team and whip them into shape! If there is no pattern and your defaulters simply can’t pay – then it’s your acquisition policy that’s the problem – hunker down with the credit risk team and get back to basics deciding who should be letting through the door.

I know this doesn’t seem as exciting as building models, but have fun – I’m sure you’ll look dashing in that hard hat!

Best,
Gini


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