Professional Documents
Culture Documents
By
Batchu Satish
Credit scoring
Payment History
Making late payments, defaulting EMI s or dues shows trouble and
will give negative affect to the score
10
35
25
30
payment history
Credit limit
Types of loans
new credit
Model Implementation
Model validation
Development
phase
1940-1941
Logistic regression
and probit analysis*
1971 onwards
From 1994
Neural Networks**
From 1995
Genetic
From 1994
programming**
* Traditional or conventional statistical method
** Advanced computerized methodologies
Remarks
Normality restriction
It mostly deals with
categorical/ qualitative
value thus It does not
require Normality
assumption
The accuracy of above two
models was not very high.
With high implementation
of machine these models
are exhibited as well as
accuracy was high
For Individual;
Individual Borrowers
YE
S
Cut-off
address
Profession
Private/public sector
Time at current
profession
Monthly revenues
House owner
No previous credits
Duration of the loan
Amount and type of
loan
And other
demographic
Make
decision
Identify the
Bankruptcy level with
using Z-score
For individuals;
credit score be one of the most important factors in
determining whether or not you are approved for credit.
it also be a major factor in determining the terms and
conditions of the loan/credit extension.
It can help to understand the interest rate structure for loan
applicant.
low credit score= high interest (vice-versa)
For corporate clients:
It useful to determine the bankruptcy position of firm.
For Banks and financial institutions:
It is very helpful to predict the customer default position with cut-off
score, also good or Bad 'customer.