An Application of Logit Model to Credit Scoring and its Implications to Financial Market

Abstract

We did a tentative work by collecting loan data in 2012 from Freddie Mac mortgage company and make 90 days past due as a proxy to estimate a logit model thus to get the applicants? probability of default/delinquency. Additionally, we analyzed the economic benefits by using credit scoring methods and give implications to China?s financial markets. We suggest China take such a method with available Chinese-characteristic variables into account, thus be able to predict the default probability and manage the credit risk in China.