Credit scoring in banks and financial institutions via data mining techniques: A literature review

Abstract

This paper presents a comprehensive review of the studies conducted in the application of data mining techniques focus on credit scoring from 2000 to 2012. Yet, there isn‟t adequate literature reviews in the field of data mining applications in credit scoring. Using a novel research approach, this paper investigates academic and systematic literature review and includes all of the journals in the Science direct online journal database. The studies are categorized and classified into enterprise, individual and small and midsized (SME) companies credit scoring. Data mining techniques are also categorized to single classifier, Hybrid methods and Ensembles. Variable selection methods are also investigated separately because there is a major issue in a credit scoring problem. The findings of this literature review reveals that data mining techniques are mostly applied to an individual credit score and there is inadequate research on enterprise and SME credit scoring. Also ensemble methods, support vector machines and neural network methods are the most favorite techniques used recently. Hybrid methods are investigated in four categories and two of the frequently used combinations are “classification and classification” and “clustering and classification”. This review of literature analysis provides scope for future research and concludes with some helpful suggestions for further research.