Step-by-step method of credit scoring model development for risk dynamics estimation and management

Abstract

Create scoring parametric model based on the concept of survival for application stage of credit cycle in the Ukrainian consumer loans market which allows to take into account factors' influence change on default risk in dynamics. Scientific and special methods were applied during the research: the historical, system and structure methods, methods of logical and economic analysis, economic-mathematical modeling methods as well as number of probability theory and mathematical statistics methods. Scoring model for assessment of credit risk dynamics was built based on proposed step-by-step method. Significant factors which determine default risk during whole loan term were defined. Credit scoring modeling methods were improved by consideration of factors influence change on credit risk measure in dynamics. Step-by-step method is proposed for credit scoring model development which allows to assess credit risk dynamics considering factors influence change on credit risk over time.