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How is credit scoring used to predict default in China?

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  • Ha Thu Nguyen

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper, we carry out a review of literature for both traditional and sophisticated credit assessment techniques, with a particular focus on credit scoring which is broadly used as a costeffective credit risk management tool. The objective of the paper is to present a set-up of an application credit-scoring model and to estimate such a model using an auto loan data-set of one of the largest automobile manufacturers in China. The logistic regression approach, which is widely used in credit scoring, is employed to construct our scorecard. A detailed step-by-step development process is provided, as are discussions about specific modeling issues. The paper finally shows that "married", "house owner", "female", age in years, "working in public institutions, foreign, or joint venture companies", down payment rate, and maximum months on book of current accounts negatively impact the probability of default.

Suggested Citation

  • Ha Thu Nguyen, 2015. "How is credit scoring used to predict default in China?," Working Papers hal-04133309, HAL.
    • Handle: RePEc:hal:wpaper:hal-04133309
    Note: View the original document on HAL open archive server: https://hal.science/hal-04133309v2
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    References listed on IDEAS

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