Most companies involved in lending to consumers have departments dedicated to the measurement, prediction and control of losses due to credit risk.
The scorecard tries to predict the probability that the customer, if given the product, would become "bad" within a given timeframe, incurring losses for the lender.
Credit strategy is concerned with turning predictions of customer behavior (as provided by scorecards) into a decision whether to accept their business.
The placement of the cut-off is closely linked to the price (annual percentage rate – APR) that the lender is charging for the product.
The higher the price charged, the greater the losses the lender can endure and still remain profitable.
Application score is also used as a factor in deciding such things as an overdraft or credit card limit.