1997 WhatsThePointOfCreditScoring

• (Mester, 1997) ⇒ Loretta Mester. (1997). “What’s the Point of Credit Scoring.” In: Federal Reserve Bank of Philadelphia Business Review.

Subject Headings: Credit Scoring Task.

Quotes

• Credit scoring is a method of evaluating the credit risk of loan applications. Using historical data and statistical techniques, credit scoring tries to isolate the effects of various applicant characteristics on delinquencies and defaults. The method produces a “score” that a bank can use to rank its loan applicants or borrowers in terms of risk. To build a scoring model, or “scorecard,” developers analyze historical data on the performance of previously made loans to determine which borrower characteristics are useful in predicting whether the loan performed well. A well-designed model should give a higher percentage of high scores to borrowers whose loans will perform well and a higher percentage of low scores to borrowers whose loans won’t perform well. But no model is perfect, and some bad accounts will receive higher scores than some good accounts.

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	Author	volume	Date Value	title	type	journal	titleUrl	doi	note	year
1997 WhatsThePointOfCreditScoring	Loretta Mester			What’s the Point of Credit Scoring			http://www.philadelphiafed.org/research-and-data/publications/business-review/1997/september-october/brso97lm.pdf