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Using a transactor/revolver scorecard to make credit and pricing decisions

Using a transactor/revolver scorecard to make credit and pricing decisions
Using a transactor/revolver scorecard to make credit and pricing decisions
In consumer lending the traditional approach is to develop a credit scorecard which ranks borrowers according to their risk of defaulting. Bads have a high risk of default and Goods have a low risk. To maximise the profitability of credit card customers, a second classification between revolvers and transactors becomes important. Building a transactor/revolver scorecard together with a Good/Bad scorecard over the revolvers, gives rise to a risk decision system whose ranking of risk is comparable with the standard approach. The paper develops a profitability model of card users including the transactor/revolver score leads. This gives more accurate profitability estimates than models which ignore the transactor/revolver split.
0167-9236
143-151
So, M.C.
c6922ccf-547b-485e-8b74-a9271e6225a2
Thomas, L.C.
a3ce3068-328b-4bce-889f-965b0b9d2362
Seow, H-V
37aba610-227e-49c7-ab72-3e9908b8aaf3
Mues, C.
07438e46-bad6-48ba-8f56-f945bc2ff934
So, M.C.
c6922ccf-547b-485e-8b74-a9271e6225a2
Thomas, L.C.
a3ce3068-328b-4bce-889f-965b0b9d2362
Seow, H-V
37aba610-227e-49c7-ab72-3e9908b8aaf3
Mues, C.
07438e46-bad6-48ba-8f56-f945bc2ff934

So, M.C., Thomas, L.C., Seow, H-V and Mues, C. (2014) Using a transactor/revolver scorecard to make credit and pricing decisions. Decision Support Systems, 59, 143-151. (doi:10.1016/j.dss.2013.11.002).

Record type: Article

Abstract

In consumer lending the traditional approach is to develop a credit scorecard which ranks borrowers according to their risk of defaulting. Bads have a high risk of default and Goods have a low risk. To maximise the profitability of credit card customers, a second classification between revolvers and transactors becomes important. Building a transactor/revolver scorecard together with a Good/Bad scorecard over the revolvers, gives rise to a risk decision system whose ranking of risk is comparable with the standard approach. The paper develops a profitability model of card users including the transactor/revolver score leads. This gives more accurate profitability estimates than models which ignore the transactor/revolver split.

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Accepted/In Press date: 8 November 2013
e-pub ahead of print date: 16 November 2013
Published date: March 2014
Organisations: Southampton Business School

Identifiers

Local EPrints ID: 359696
URI: http://eprints.soton.ac.uk/id/eprint/359696
ISSN: 0167-9236
PURE UUID: fa808ac1-f78f-4de3-99ff-6d8cc60d235e
ORCID for M.C. So: ORCID iD orcid.org/0000-0002-8507-4222

Catalogue record

Date deposited: 08 Nov 2013 14:15
Last modified: 21 Nov 2021 02:59

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Contributors

Author: M.C. So ORCID iD
Author: L.C. Thomas
Author: H-V Seow
Author: C. Mues

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