Credit Risk Scoring (Default During Observation Window)

My team is working with an adjacent team that is developing a credit risk scoring model.

They've defined the observation window as 12 months and their performance window as the proceeding 12 months.

In situations where the customer's loan defaults within the observation window, they are dropping those customers. Their reasoning is that these customers do not make for good training data because the training data window is less than 12 months (we are limited to a rolling 24 month …

credit credit risk datascience observation risk scoring