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A two-stage least cost credit scoring model

Author

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  • William Gehrlein
  • Bret Wagner

Abstract

A least cost two-stage credit scoring model is developed and evaluated. The model is two-stage in the sense reflected by existing practice. That is, based on preliminary information, a decision is made to grant credit, deny credit, or to seek additional information before making a decision. If additional information is sought, the decision goes to the second stage, where a final decision to grant or deny credit is made. The model is based on an integer programming formulation that attempts to minimize the total combined cost of granting credit to likely defaulters, denying credit to likely payers, and for obtaining all of the information that is required to make the decisions. Copyright Kluwer Academic Publishers 1997

Suggested Citation

  • William Gehrlein & Bret Wagner, 1997. "A two-stage least cost credit scoring model," Annals of Operations Research, Springer, vol. 74(0), pages 159-171, November.
    • Handle: RePEc:spr:annopr:v:74:y:1997:i:0:p:159-171:10.1023/a:1018914219633
    DOI: 10.1023/A:1018914219633
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    Cited by:

    1. Loucopoulos, Constantine, 2001. "Three-group classification with unequal misclassification costs: a mathematical programming approach," Omega, Elsevier, vol. 29(3), pages 291-297, June.
    2. Zopounidis, Constantin & Doumpos, Michael, 2002. "Multicriteria classification and sorting methods: A literature review," European Journal of Operational Research, Elsevier, vol. 138(2), pages 229-246, April.
    3. Brandner, Hubertus & Lessmann, Stefan & Voß, Stefan, 2013. "A memetic approach to construct transductive discrete support vector machines," European Journal of Operational Research, Elsevier, vol. 230(3), pages 581-595.

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