Customer solvency prediction methods
Importance The article reviews the process of forecasting the solvency of the credit institution's customers. To outline an appropriate strategy for handling various loan balances, it is reasonable to devise more accurate methods for forecasting the solvency of borrowers at the loan repayment stage. Objectives The research pursues setting up methods, which would adequately reflect each borrower's tendency of repaying the loan depending on the loan terms, borrower's profile and credit history, and ensuring sufficient accuracy of the borrower's solvency forecast for the following period. Methods We proposed methods for predicting the borrower's solvency through Markov chains of the 1 st and 2 nd order that allowed considering the previous status of the credit history, and machine learning methods to evaluate probabilities of the credit account changes, including factors that could possibly influence the ultimate solvency. The approach implies a preliminary analysis of the credit history data and recovers missing indicators. Results Based on the methods, we propose our own algorithm for forecasting the borrowers' solvency. The efficiency of the approach is illustrated with an example. As for data of credit accounts, we implemented prediction methods and identified the best ones per each change in the status of the credit account. When evaluating the quality of estimates, we found matrices of differences between the real and projected indicators. Conclusions and Relevance The proposed methods will improve the solvency forecasts for each change in the credit account's status and enable the credit institution to take relevant measures to reduce the anomaly risk