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Credit scoring for individuals

Author

Listed:
  • Maria DIMITRIU

    (The Bucharest Academy of Economic Studies, Romania)

  • Elena Alexandra AVRAMESCU

    (The Bucharest Academy of Economic Studies, Romania)

  • Razvan Constantin CARACOTA

    (The Bucharest Academy of Economic Studies, Romania)

Abstract

Lending money to different borrowers is profitable, but risky. The profits come from the interest rate and the fees earned on the loans. Banks do not want to make loans to borrowers who cannot repay them. Even if the banks do not intend to make bad loans, over time, some of them can become bad. For instance, as a result of the recent financial crisis, the capability of many borrowers to repay their loans were affected, many of them being on default. That’s why is important for the bank to monitor the loans. The purpose of this paper is to focus on credit scoring main issues. As a consequence of this, we presented in this paper the scoring model of an important Romanian Bank. Based on this credit scoring model and taking into account the last lending requirements of the National Bank of Romania, we developed an assessment tool, in Excel, for retail loans which is presented in the case study.

Suggested Citation

  • Maria DIMITRIU & Elena Alexandra AVRAMESCU & Razvan Constantin CARACOTA, 2010. "Credit scoring for individuals," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 13(2), pages 361-377, December.
    • Handle: RePEc:rom:econmn:v:13:y:2010:i:2:p:361-377
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    References listed on IDEAS

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    1. David Durand, 1941. "Risk Elements in Consumer Instalment Financing," NBER Books, National Bureau of Economic Research, Inc, number dura41-1, March.
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    More about this item

    Keywords

    Credit scoring; credit risk; retail loans.;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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