Credit Scoring Techniques: A Survey

Thabiso Peter Mpofu, Macdonald Mukosera

Abstract: Credit scoring is a numerical expression of the credit worthiness of an individual. A Value with a specific creditworthiness associated is assigned to an individual. Overall objective is to determine the creditworthiness of an individual. Ability of an individual to repay is determined in the credit scoring process. The credit scoring process looks at specific criteria such as income, credit history and many others. All this is done with the intent to reduce the overall default rate thereby decreasing the overall risk of financial institutions such as banks and micro lending institutions. Several credit scoring methodologies have been proposed and implemented and are varied from statistical based methods to Artificial Intelligence based techniques.

Keywords: credit scoring, credit worthiness, default rate, risk, credit scoring techniques