ABSTRACT

The aim of this paper is to present the set-up of a behavioral credit-scoring model and estimate such a model using an auto loan data set of one of the largest multinational financial institutions based in France. We rely on the logistic regression approach, which is commonly used in credit scoring, to construct a behavioral scorecard. A detailed description of the model-building process is provided, as are discussions about specific modeling issues. The paper then uses a number of quantitative criteria to identify the model best suited to modeling. Finally, it is demonstrated that such a model possesses the desirable characteristics of a scorecard.