Article ID: | iaor20021254 |
Country: | United Kingdom |
Volume: | 52 |
Issue: | 9 |
Start Page Number: | 1007 |
End Page Number: | 1016 |
Publication Date: | Sep 2001 |
Journal: | Journal of the Operational Research Society |
Authors: | Thomas L.C., Stepanova M. |
Keywords: | credit scoring |
Credit scoring is one of the most widely used applications of quantitative analysis in business. Behavioural scoring is a type of credit scoring that is performed on existing customers to assist lenders in decision like increasing the balance or promoting new products. This paper shows how using survival analysis tools from reliability and maintenance modelling, specifically Cox's proportional hazards regression, allows one to build behavioural scoring models. Their performance is compared with that of logistic regression. Also the advantages of using survival analysis techniques in building scorecards are illustrated by estimating the expected profit from personal loans. This cannot be done using the existing risk behavioural systems.