Quantifying Credit-scoring Performance
Author(s)
G. Verstraeten & D. Van den Poel
Abstract
Recently, the consumer credit industry has experienced a sizeable growth, where
scoring techniques have grown to outperform the traditional, judgmental manner
of assessing credit risk. Using the data of a Belgian direct-mail company offering
consumer credit, the authors have shown a clear improvement in comparison
with its current credit evaluation system, constructed by an international
company specialized in consumer credit scoring, and identify the size of this
performance increase due to population drift versus model improvement.
Considering the crucial impact of the accuracy of the score on the cost side
(lowered credit risk) as well as on the revenue side (increased accepted
applications), in this study, we highlight the importance of introducing different
performance measures to quantify credit risk performance. Hence, instead of
reporting predictive perform
Keywords
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