System, method and computer program for managing credit decisions

• US 20040107161A1
• Filed: 08/12/2003
• Published: 06/03/2004
• Est. Priority Date: 08/13/2002
• Status: Active Grant

• Current Assignee: International Business Machines Corporation
• Original Assignee: International Business Machines Corporation
• Inventors: Maeda, Yasutaka, Takaku, Shinichi, Tanaka, Satoshi
• Granted Patent: US 7,941,363 B2
• Time in Patent Office: Days
• US Class Current: 705/38
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

A system, computer program product and method for deciding whether to make a loan to an applicant and/or terms of the loan. A first program function determines a credit risk of the applicant. A second program function computes a default probability of the applicant over time based on the credit risk. The second program function determines a surviving probability of an applicant based on the applicant'"'"'s credit risk. The second program function determines the default probability for each month of the term of the loan based in part on the surviving probability. A third program function computes a sum of the expected profit during each month of a term of the loan based in part on the default probability.

Claims

1. A computer program product for deciding whether to make a loan to an applicant and/or terms of the loan, said computer program product comprising:

a computer readable medium;

first program instructions to determine credit risk of said applicant;

second program instructions to compute a default probability of said applicant over time based on said credit risk; and

third program instructions for computing a sum of expected profit from said loan based in part on said default probability; and

wherein

said first, second and third program instructions are recorded on said medium.

2. The program product as set forth in claim 1, wherein said first program instructions determine said credit risk based on a credit risk model of said applicant.

3. The program product as set forth in claim 2, further comprising fourth program instructions to compute a risk that said risk model will shift downward.

4. The program product as set forth in claim 1, wherein said second program instructions compute said default probability based in part on a term of said loan.

5. The program product as set forth in claim 1, wherein said third program instructions classify said applicant into an initial status class and determine a probability that said applicant will transition from said initial status class into another status class based on said credit risk of said applicant.

6. The program product as set forth in claim 5 wherein said third program instructions determine a probability that said applicant will default based in part on said other status class.

7. A computer system for deciding whether to make a loan to an applicant and/or terms of the loan, said system comprising:

means for determining credit risk of said applicant;

means for computing a default probability of said applicant over time based on said credit risk; and

means for computing a sum of expected profit from said loan based in part on said default probability.

8. A computer program product for deciding whether to make a loan to an applicant and/or the terms of the loan, said computer program product comprising:

a computer readable medium;

first program instructions to determine a credit risk of said applicant;

second program instructions to determine a surviving probability of an applicant based on said credit risk of said applicant;

third program instructions to determine a default probability for each month of a term of said loan based on said surviving probability; and

fourth program instructions to determine an expected profit during the term of said loan based on said default probability; and

wherein

said first, second, third and fourth program instructions are recorded on said medium.

9. The program product as set forth in claim 8, further comprising fifth program instructions to classify said applicant into an initial status class and determine a probability that said applicant will transition from said initial status class to another status class based on said credit risk of said applicant;

and wherein said fifth program instructions are recorded on said medium.

10. The program product as set forth in claim 9 wherein said fifth program instructions determine a probability that said applicant will default based in part on said other status class.

11. A computer program product for deciding whether to make a loan to an applicant and/or the terms of the loan, said computer program product comprising:

a computer readable medium;

first program instructions to determine a risk model for said applicant based on attributes of said applicant;

second program instructions to determine a default probability of said applicant as a function of time based on said risk model; and

third program instructions to compute a sum of an expected profit from said loan over time based on said default probability; and

wherein

said first, second and third program instructions are recorded on said medium.

12. The program product as set forth in claim 11, wherein said first program instructions determine said risk model by a logistic regression analysis.

13. The program product as set forth in claim 12 wherein said logistic regression analysis evaluates a quantitative variable for said applicant derived from a tree analysis which classifies said applicant into a risk status class.

14. The program product as set forth in claim 11, wherein said second program instructions determine said default probability for each month, wherein said default probability is different for different months.