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Towards profitability. A utility approach to the credit scoring problem

Research output: Working paper

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Towards profitability. A utility approach to the credit scoring problem. / Finlay, S M.
Lancaster University: The Department of Management Science, 2006. (Management Science Working Paper Series).

Research output: Working paper

Harvard

Finlay, SM 2006 'Towards profitability. A utility approach to the credit scoring problem' Management Science Working Paper Series, The Department of Management Science, Lancaster University.

APA

Finlay, S. M. (2006). Towards profitability. A utility approach to the credit scoring problem. (Management Science Working Paper Series). The Department of Management Science.

Vancouver

Finlay SM. Towards profitability. A utility approach to the credit scoring problem. Lancaster University: The Department of Management Science. 2006. (Management Science Working Paper Series).

Author

Finlay, S M. / Towards profitability. A utility approach to the credit scoring problem. Lancaster University : The Department of Management Science, 2006. (Management Science Working Paper Series).

Bibtex

@techreport{44b8d4afe5764bd197e759ded5bb7572,
title = "Towards profitability. A utility approach to the credit scoring problem",
abstract = "Since credit scoring was first applied in the 1940s the standard methodology has been to treat consumer lending decisions as a binary classification problem, where the goal has been to make the best possible {\textquoteleft}good/bad{\textquoteright} classification of accounts on the basis of their eventual delinquency status. However, the real goal of commercial lending organisations is to forecast continuous financial measures, such as contribution to profits, but there has been little research in this area. In this paper continuous models of customer worth are compared to binary models based on customer behaviour. Empirical results show that while models of customer worth do not perform well in terms of classifying accounts by their good/bad status, they significantly outperform standard classification methodologies when ranking accounts based on their financial worth to lenders.",
keywords = "Finance, Credit Scoring, Profitability, Utility",
author = "Finlay, {S M}",
year = "2006",
language = "English",
series = "Management Science Working Paper Series",
publisher = "The Department of Management Science",
type = "WorkingPaper",
institution = "The Department of Management Science",

}

RIS

TY - UNPB

T1 - Towards profitability. A utility approach to the credit scoring problem

AU - Finlay, S M

PY - 2006

Y1 - 2006

N2 - Since credit scoring was first applied in the 1940s the standard methodology has been to treat consumer lending decisions as a binary classification problem, where the goal has been to make the best possible ‘good/bad’ classification of accounts on the basis of their eventual delinquency status. However, the real goal of commercial lending organisations is to forecast continuous financial measures, such as contribution to profits, but there has been little research in this area. In this paper continuous models of customer worth are compared to binary models based on customer behaviour. Empirical results show that while models of customer worth do not perform well in terms of classifying accounts by their good/bad status, they significantly outperform standard classification methodologies when ranking accounts based on their financial worth to lenders.

AB - Since credit scoring was first applied in the 1940s the standard methodology has been to treat consumer lending decisions as a binary classification problem, where the goal has been to make the best possible ‘good/bad’ classification of accounts on the basis of their eventual delinquency status. However, the real goal of commercial lending organisations is to forecast continuous financial measures, such as contribution to profits, but there has been little research in this area. In this paper continuous models of customer worth are compared to binary models based on customer behaviour. Empirical results show that while models of customer worth do not perform well in terms of classifying accounts by their good/bad status, they significantly outperform standard classification methodologies when ranking accounts based on their financial worth to lenders.

KW - Finance

KW - Credit Scoring

KW - Profitability

KW - Utility

M3 - Working paper

T3 - Management Science Working Paper Series

BT - Towards profitability. A utility approach to the credit scoring problem

PB - The Department of Management Science

CY - Lancaster University

ER -