An Empirical Study on Credit Scoring and Credit Scorecard for Financial Institutions (original) (raw)

2019, International Journal of Advanced Research in Computer Engineering & Technology ISSN: 2278 – 1323

Financial institutions have become the indispensable field in this digital era. Owing to technological development, at least 50% of the people are doing at least a single transaction per day with banks. This technological development not only leads to a healthier financial crisis but also leads to an increase in fraudulent activities. Thus, the bank finds insecure in sanctioning the loan to the borrower. This credit risk is a major concern for financial institutions in today's world. Thus, the main objective of this paper is to provide an empirical study on credit risks faced by the financial institutions and the credit risk management employing credit scoring strategies. These strategies clearly estimate the creditworthiness and trustworthiness of the customers belonging to the financial institutions. Generally, credit scoring or credit rating computes the probability of repaying the loan for the customers based on their credit history or payment history along with their background history. With the calculated points or scores, the lenders can identify the ability of the customer's creditworthiness.

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