In the trenches of the credit card wars, the scorecard is the weapon of choice for targeting desirable applicants. As market share tightens, bankers are relying on these computerized behavior models to tap the best customers, manage their existing accounts, and make marketing decisions.

Fair, Isaac & Co. of San Rafael, Calf., the leading credit scoring vendor, dominates the industry, with revenues of $66.7 million for fiscal 1993.

CCN-MDS Division in Atlanta, with 150 employees, runs a distant second, leaving a small percentage of business to a handful of smaller shops, including credit bureaus like TRW Credit Scoring Services.

But two executives who left MDS to start their own company, Scoring Solutions Inc., contend that there's room for new blood.

Fran Lyons, who was employed by CCN-MDS for eight years, specializing in developing analytical scoring models, started the new business in June 1993. A few months later she was joined by her colleague Elina Rodriguez, who resigned in September 1993 after six years with CCN-MDS.

"[There were] a lot of changes going on at MDS at the high management level;' said Ms. Lyons, co-principal of Atlanta-based Scoring Solutions. "Because of those changes I thought there was an opportunity to win over some customers of MDS."

Some of the dozen clients who have purchased products from Scoring Solutions, which usually run $30,000 to $40,000 a model, include First USA, Dean Witter, Discover and Co., Household International, Boscov's Department Stores, First Interstate Bancorp, and Citicorp.

Ms. Lyons and Ms. Rodriguez hired Timothy Olzer, a senior technical consultant, in February, and the company moved to larger office space last month.

Ms. Lyons said the company fills a need in the industry for a more customized approach to creating credit scoring models - a tricky, high-tech method of predicting the payment behavior of prospective cardholders through data gathered by lenders and analyzed by vendors who score new applicants based on the patterns of past borrowers.

Criteria can include payment behavior, credit bureau history, demographics, and job description. A score determines when the applicant is denied credit.

Ms. Lyons said that other scoring vendors tend to take "a production line approach," sticking to traditional scoring methods, instead of seeking inventive measures to increase approval rates while decreasing risk.

The company creates segmentation models that compare similar portions of the population.

For example, students with a less extensive credit history than the middle-aged group tend to score lower on a general behavior model, but when they are compared with each other, the creditor might be able to approve the best of that group, ultimately resulting in a greater overall approval rate, sometimes 10% higher.

Jennifer Porter, assistant vice president of marketing for CCN-MDS, said that MDS also offers segmentation systems and a full line of scoring models.

"One of the keys to our success since 1976 has been our customized service, the willingness and ability to think outside the box, and not give a cookie-cutter solution."

Ms. Lyons acknowledged that MDS offers segmentation models but said that she introduced the technique during her tenure. "It's a complicated analysis approach," she said. "They no longer have an experienced product manager there who knows how to market and develop the product."

Ms. Porter said that Ms. Lyons was instrumental in developing segmentation models for MDS, and that the two companies now carry a similar product.

Even so, she said, the larger MDS has the advantage of offering software and has a dedicated research and development team to implement new technology.

Industry observers said that standard procedures and methodology used in building models are fairly well established, making it unlikely that anyone would be irreplaceable, but customer relationships play a large role in maintaining accounts.

Conrad Zion, director of business analysis at Household International, said his company had been impressed with Ms. Lyons while she was at MDS. "When she opened up her own business, we put it onto a list of vendors we would work 'with because of her demonstrated competence with projects she had worked on in the past."

Mr. Zion said he continues to work with MDS and Fair Isaac and compared Scoring Solutions favorably.

Although he acknowledged that the field was dominated by the two largest companies, he maintained that there is always room for a niche player. "GM makes a lot of cars, but they can't satisfy everyone."

Industry experts said that the leading vendors tend to cater to larger financial institutions, while the smaller credit grantors, with just as many needs, get lost in the shuffle. Start-up scoring companies may absorb that business. They also may provide more personalized customer service because they have more to prove.

Kenneth Bohringer, a securities analyst with Prudential Securities in New York, said credit scoring is a growth area. "As consumer debt rises, you're going to see a rise in concern with creditworthiness, so there would be room for a company that can establish its niche and establish loyalty among its customers."

"We plan to continue doing very customized work," Ms. Lyons said, "to look for opportunities for our clients where we can help them and hopefully cement relationships."

She said that Scoring Solutions can contribute equally to both large and small institutions. "A lot of large companies want customized experienced work, which I feel we provide, more so than the large vendors whose experienced staff has moved up in the organization and has limited involvement in modeling projects."

Scoring Solutions attracts customers through references, their reputation, and direct mail.

"We're going to grow slowly and probably not to the extent of an MDS or Fair Isaac," said Ms. Lyons. "We're not looking to replicate what they're doing."

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