The use of knowledge discovery techniques for behavioural ccoring

This paper discusses the use of knowledge discovery techniques for a recent development in the field of scoring: behavioural scoring. The goal of behavioural scoring is to develop a model that predicts the creditworthiness of existing customers on the basis of their behaviour in the past. This paper explains briefly the Knowledge Discovery in Data process and applies the technique of logistic regression to real life datasets of a Belgian financial institution. It describes the development of scoring models for a cheque account, a credit account and the customer level and compares the model results for different pre-processing values and selection methods by means of the ROC curve, p-values and misclassification rates.