Abstract
Psychometric-based credit scores measure important personality traits that are characteristic of good borrowers’ behaviors. While such data can potentially improve credit models for underbanked consumers, the utility of psychometric data in consumer lending is still largely understudied. The present study contributes to the literature in this respect, as it is one of the first studies to evaluate the efficacy of psychometric-based credit scores for predicting future loan defaults among underbanked consumers. The results from two culturally diverse samples of loan applicants (Sub-Saharan Africa, n = 1113; Western Europe, n = 1033) found that psychometric scores correlated significantly with future loan defaults (Gini = 0.28–0.31) and were incrementally valid above and beyond the banks’ own credit scorecards. These results highlight the theoretical basis for personality in financial behaviors, as well as the practical utility that psychometric scores can have for credit decisioning in general and the facilitation of financial inclusion for underbanked consumer groups in particular.
Original language | English |
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Article number | 423 |
Journal | Journal of Risk and Financial Management |
Volume | 17 |
Issue number | 9 |
DOIs | |
State | Published - Sep 2024 |
Bibliographical note
Publisher Copyright:© 2024 by the author.
Keywords
- credit scoring
- financial inclusion
- psychometrics
- unbanked
ASJC Scopus subject areas
- Accounting
- Business, Management and Accounting (miscellaneous)
- Finance
- Economics and Econometrics