Credit Scoring with Social Network Data

Yanhao Wei, Pinar Yildirim, Christophe Van den Bulte, Chrysanthos Dellarocas (2016) Credit Scoring with Social Network Data. Marketing Science 35(2):234-258.

26 Pages Posted: 3 Aug 2014 Last revised: 2 Mar 2018

See all articles by Yanhao Wei

Yanhao Wei

University of Southern California - Marshall School of Business

Pinar Yildirim

University of Pennsylvania - The Wharton School

Christophe Van den Bulte

University of Pennsylvania - Marketing Department

Chrysanthos Dellarocas

Boston University, Questrom School of Business - Department of Information Systems

Date Written: July 1, 2014

Abstract

Motivated by the growing practice of using social network data in credit scoring, this study analyzes 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 individuals can strategically construct their social networks to attain higher credit scores. We find that, if individuals are motivated to improve their scores, they may form fewer ties and focus them on more similar partners. The impact of such endogenous tie formation on the accuracy of consumer credit scores is ambiguous. Scores can become more accurate as a result of modi fications 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 e ffort that improves everyone's creditworthiness. We discuss implications for both managers and public policy.

Keywords: social networks, credit scores, credit financing

JEL Classification: M00, E51, G20, D50

Suggested Citation

Wei, Yanhao and Yildirim, Pinar and Van den Bulte, Christophe and Dellarocas, Chrysanthos N., Credit Scoring with Social Network Data (July 1, 2014). Yanhao Wei, Pinar Yildirim, Christophe Van den Bulte, Chrysanthos Dellarocas (2016) Credit Scoring with Social Network Data. Marketing Science 35(2):234-258. . Available at SSRN: https://ssrn.com/abstract=2475265 or http://dx.doi.org/10.2139/ssrn.2475265

Yanhao Wei

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

Pinar Yildirim (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Christophe Van den Bulte

University of Pennsylvania - Marketing Department ( email )

700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340
United States

Chrysanthos N. Dellarocas

Boston University, Questrom School of Business - Department of Information Systems ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

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