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- Title
Credit Scoring with Social Network Data.
- Authors
Yanhao Wei; Yildirim, Pinar; Van den Bulte, Christophe; Dellarocas, Chrysanthos
- Abstract
Motivated by the growing practice of using social network data in credit scoring, we analyze the impact of using network-based measures on customer score accuracy and on tie formation among customers. We develop a series of models to compare the accuracy of customer scores obtained with and without network data. We also investigate how the accuracy of social network-based scores changes when consumers can strategically construct their social networks to attain higher scores. We find that those who are motivated to improve their scores may form fewer ties and focus more on similar partners. The impact of such endogenous tie formation on the accuracy of consumer scores is ambiguous. Scores can become more accurate as a result of modifications in social networks, but this accuracy improvement may come with greater network fragmentation. The threat of social exclusion in such endogenously formed networks provides incentives to low-type members to exert effort that improves everyone's creditworthiness. We discuss implications for managers and public policy.
- Subjects
CREDIT ratings; CREDIT scoring systems; SOCIAL networks; SOCIAL status; DISCRIMINATION (Sociology)
- Publication
Marketing Science, 2016, Vol 35, Issue 2, p234
- ISSN
0732-2399
- Publication type
Article
- DOI
10.1287/mksc.2015.0949