Credit-Scoring-Insofe

Credit scoring is a statistical analysis performed by lenders and financial institutions to access one’s credit worthiness. The credit risk scores are used to evaluate the potential risk posed by lending money to consumers and in turn they can take decisions to mitigate losses due to bad debt. You are given the data of portfolio of existing home loan borrowers of a US housing finance company. The data includes repayment history etc. The housing loans may have been financed by this housing finance company or acquired from another. The portfolio is being mortgaged by the housing finance company for raising additional finance, for new housing finance business. The lender evaluates the portfolio in terms of default risk based on the credit scores of each individual borrower and potential loss at portfolio level. The evaluation helps the lender to determine the quantum of additional finance which can be allowed based on the mortgage. The credit score is determined based on the information that is thought to affect or predict repayment behaviour. In this background, you are required to predict the credit score based on the evolving form of credit worthiness assessment called by the name ‘behavioral analysis’. The behaviroal analysis uses the data of repayment history and alternative sources of data like life-stage analysis, employment history, utility bill payment history, professional licensure, property asset information, e-commerce shopping behaviour, online profile presence etc. Such periodic determination of credit score also helps the housing finance company to improve it’s own underwriting policy and process in terms of quality of selection, determination of optimum credit and/or optimum period, terms and conditions and finally refusal conditions. This credit risk score information is also useful to Credit information Organisations which calculate and share Credit information reports for Lenders and individuals. It also provides an input to the Equity research analysts for valuation of the housing finance company by quantifying the expected future performance of the housing finance company and for providing rating or outlook to potential investors. Do check the research paper I've found useful on how credit risk is related to housing finance