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A credit scoring model based on the Myers–Briggs type indicator in online peer-to-peer lending

Author

Listed:
  • Hyunwoo Woo

    (Yonsei University)

  • So Young Sohn

    (Yonsei University)

Abstract

Although psychometric features have been considered for alternative credit scoring, they have not yet been applied to peer-to-peer (P2P) lending because such information is not available on platforms. This study proposed an alternative credit scoring model for P2P lending by extracting typical personality types inferred from the borrowers’ job category. We projected a virtual space of borrowers by using the affinity matrix based on the Myers–Briggs type indicator (MBTI) that fits each job category. Applying the distance in this space to Lending Club data, we used locally weighted logistic regression to vary the coefficients of the variables, which affect loan repayments, with each MBTI type for predicting the default probability. We found that each MBTI type’s credit scoring model has different significant variables. This study provides insights into breakthroughs in developing alternative credit scoring for P2P lending.

Suggested Citation

  • Hyunwoo Woo & So Young Sohn, 2022. "A credit scoring model based on the Myers–Briggs type indicator in online peer-to-peer lending," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-19, December.
    • Handle: RePEc:spr:fininn:v:8:y:2022:i:1:d:10.1186_s40854-022-00347-4
    DOI: 10.1186/s40854-022-00347-4
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    More about this item

    Keywords

    Alternative credit scoring; Behavioral finance; Credit scoring; Locally weighted logistic regression; MBTI; P2P lending;
    All these keywords.

    JEL classification:

    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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