Default Predictors in Credit Scoring - Evidence from France’s Retail Banking Institution

The aim of this paper is to present the set-up of a behavioral credit-scoring model and to estimate such a model using the auto loan data set of one of the largest multinational financial institutions based in France. We rely on a logistic regression approach, which is commonly used in credit scoring, to construct a behavioral scorecard. A detailed description of the model building process is provided, as are discussions about specific modeling issues. The paper then uses a number of quantitative criteria to identify the model best suited to modeling. Finally, it is demonstrated that such model possesses the desirable characteristics of a scorecard.