A survey of credit and behavioural scoring: forecasting financial risk of lending to consumers

Credit scoring and behavioural scoring are the techniques that help organisations decide whether or not to grant credit to consumers who apply to them. This article surveys the techniques used - both statistical and operational research based to support these decisions. It also discusses the need to incorporate economic conditions into the scoring systems and the way the systems could change from estimating the probability of a consumer defaulting to estimating the profit a consumer will bring to the lending organisation - two of the major developments being attempted in the area. It points out how successful has been this under-researched area of forecasting financial risk. (C) 2000 Elsevier Science B.V. All rights reserved.