SEMINAR:Credit Scoring in a Changing World

Guest: Galina Andreeva, University of Edinburgh Business School

Title:Credit Scoring in a Changing World

Date/Time: March 5, 2025, 13:40

Location: FENS G015

Abstract: Credit plays a pivotal role in modern society, allowing individuals, businesses, and governments to access resources beyond their immediate means. It enables investment in education, housing, and business ventures, drives economic growth, and fosters innovation. For consumers, credit facilitates the smoothing of consumption and helps manage financial shocks, while businesses rely on it for expansion, sustaining operations, and navigating economic uncertainties. At a macroeconomic level, credit is fundamental to financial stability and resilience, ensuring the continuous flow of liquidity, which is essential for the functioning of markets and economies. Without well-functioning credit systems, economic opportunities would be significantly constrained, and societal progress impeded. Yet, credit inherently carries the risk of non-repayment, making risk assessment a critical component of lending. Credit scoring has long been the dominant approach for estimating this risk in individual lending. Since its inception in the 1940s–1950s, credit scoring has been widely adopted by lenders, with large retail banks almost exclusively relying on automated credit scoring systems to support lending decisions. Traditionally, the primary objective of credit scoring has been to determine whether a borrower should be granted a loan. This is achieved using mathematical, statistical, and, more recently, machine-learning and AI models, which estimate the probability of default based on historical data. Recent years have witnessed a surge in new methodologies and technologies in the field of credit risk assessment, driven by new problems and challenges, such as increasing uncertainty and costs of living, Big Data, climate change. These challenges are reshaping traditional credit scoring methods. The talk will provide an overview of credit scoring as an academic discipline, highlighting its evolution, new directions, and recent developments in the field.

Bio: Prof Galina Andreeva holds the personal chair of Societal Aspects of Credit. Her research evolves around credit risk of individuals and small businesses using AI and machine-learning techniques, applied to Big Data, including novel types of data, such as Open Banking financial transactions, web-browsing, textual data. She has more than a decade of experience of building credit scoring models, as part of her research or consultancy projects. Areas of specific focus include financial vulnerability and algorithmic fairness. She publishes in top academic journals - European Journal of Operational Research, Risk Analysis: An International Journal,Journal of Financial Management, Markets and Institutions, Journal of Financial Stability, Journal of Financial Accountability and Management. She guest edited three special issues on Credit Risk Modelling, and organised major international conferences in Credit Risk.

Galina directs Credit Research Centre (CRC), which has been at the forefront of quantitative research on credit risk for almost 30 years, successfully bringing together academics and practitioners.