“Predict” or “Forecast”?

What is the difference between “prediction” and “forecasting”? I heard this being asked quite a few times lately. The Predictive Analytics World conference website has a Predictive Analytics Guide page with the following Q&A: How is predictive analytics different from forecasting? Predictive analytics is something else entirely, going beyond standard forecasting by producing a predictive score for each customer or other organizational element. In contrast, forecasting provides overall aggregate estimates, such as the total number of purchases next quarter. For example, forecasting might estimate the total number of ice cream cones to be purchased in a certain region, while predictive analytics tells you which individual … Continue reading “Predict” or “Forecast”?

New “predictive tools” from Fair Issac

An interesting piece in the Star Tribune: Fair Isaac hopes its new tools lessen lenders’ risk of defaults was sent to me by former student Erik Anderson. Fair Issac is apparently updating their method for computing FICO scores for 2008. According to the article “in the next few weeks [Fair Issac] will roll out a suite of tools designed to predict future default risk”. The emphasis is on predicting. In other words, given a database of past credit reports, a model is developed for predicting default risk. I would be surprised if this is a new methodology. Trying to decipher … Continue reading New “predictive tools” from Fair Issac