Work out scorecard cut off instantly with clear inputs, formula shown and shareable results.
A scorecard cut-off trades volume against risk. Every point of extra approval brings additional good accounts and additional bad ones, and the cut-off should sit where the marginal good business still covers the marginal loss.
Cut-off trade-off
Bads accepted = approved × bad rate above cut-off; bads avoided = rejected × bad rate below
Figures are estimates based on the inputs given. Bank charges, regulatory minima and market rates change and differ between institutions and jurisdictions. This is not financial advice — confirm with your bank or treasury policy.
Where marginal revenue from the next slice of approvals equals marginal expected loss plus origination cost.
Because scores are probabilistic. Any cut-off refuses some borrowers who would have paid perfectly.