Personal values and credit scoring: new insights in the financial prediction

Abstract

The objective of quantitative credit scoring is to develop accurate models of classification. Most attention has been devoted to deliver new classifiers based on variables commonly used in the economic literature. Several interdisciplinary studies have found that personality traits are related to financial behaviour; therefore, psychological traits could be used to lower credit risk in scoring models. In our paper, we considered financial histories and psychological traits of customers of an Italian bank. We compared the performance of kernel-based classifiers with those of standard ones. We found very promising results in terms of misclassification error reduction when personality attitudes are included in models, with both linear and non-linear discriminants. We also measured the contribution of each variable to risk prediction in order to assess importance of each predictor.

Keywords:

• Credit scoring
• psychological traits
• credit information
• financial prediction
• Kernel discriminant

Acknowledgements

The authors gratefully acknowledge the helpful remarks provided by prof. L. Lebart. They also thank anonymous referees for their comments and suggestions that have helped improving the paper. The usual disclaimer applies.

Notes

No potential conflict of interest was reported by the authors.