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PHAB scores: proportional hazards analysis behavioural scores

Author

Listed:
  • M Stepanova

    (University of Southampton)

  • L C Thomas

    (University of Southampton)

Abstract

Credit scoring is one of the most widely used applications of quantitative analysis in business. Behavioural scoring is a type of credit scoring that is performed on existing customers to assist lenders in decisions like increasing the balance or promoting new products. This paper shows how using survival analysis tools from reliability and maintenance modelling, specifically Cox's proportional hazards regression, allows one to build behavioural scoring models. Their performance is compared with that of logistic regression. Also the advantages of using survival analysis techniques in building scorecards are illustrated by estimating the expected profit from personal loans. This cannot be done using the existing risk behavioural systems.

Suggested Citation

  • M Stepanova & L C Thomas, 2001. "PHAB scores: proportional hazards analysis behavioural scores," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 52(9), pages 1007-1016, September.
    • Handle: RePEc:pal:jorsoc:v:52:y:2001:i:9:d:10.1057_palgrave.jors.2601189
    DOI: 10.1057/palgrave.jors.2601189
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