Microenvironment-specific Effects in the Application Credit Scoring Model

Khudnitskaya, Alesia S. (2009): Microenvironment-specific Effects in the Application Credit Scoring Model.

Abstract

Paper introduces the improved version of a credit scoring model which assesses credit worthiness of applicants for a loan. The scorecard has a two-level multilevel structure which nests applicants for a loan within microenvironments. Paper discusses several versions of the multilevel scorecards which includes random-intercept, random-coefficients and group-level variables. The primary benefit of the multilevel scorecard compared to a conventional scoring model is a higher accuracy of the model predictions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Credit scoring; Hierarchical clustering; Multilevel model; Random-coefficient; Random-intercept; Monte Carlo Markov chain
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation Methods; D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Household Saving; Personal Finance; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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