Statistical Classi®cation Methods in Consumer Credit Scoring: a Review

Credit scoring is the term used to describe formal statistical methods used for classifying applicants for credit into `good' and `bad' risk classes. Such methods have become increasingly important with the dramatic growth in consumer credit in recent years. A wide range of statistical methods has been applied, though the literature available to the public is limited for reasons of commercial con®dentiality. Particular problems arising in the credit scoring context are examined and the statistical methods which have been applied are reviewed.