What is AUC, and when is it used?

Steps

For selecting the right model for a given business problem, we take the following steps:

1. Plot ROC for a given algorithm for different threshold
2. Do this for all the other algorithms
3. Select the algorithm which has the largest area under Receiver Operator Curve.

This is the general approach but you need not always consider the whole receiver operator curve, you can chose the curve up till the threshold suited for your business problem.