Louis Hyman
- Published in print:
- 2011
- Published Online:
- October 2017
- ISBN:
- 9780691140681
- eISBN:
- 9781400838400
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691140681.003.0004
- Subject:
- History, American History: 20th Century
This chapter focuses on personal loan departments. On May 4, 1928, National City Bank opened the nation's first personal loan department. Curiously, despite the popularity of the department and ...
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This chapter focuses on personal loan departments. On May 4, 1928, National City Bank opened the nation's first personal loan department. Curiously, despite the popularity of the department and despite the prominence of National City Bank—one of the country's largest commercial banks—few other banks opened their own personal loan departments in the late 1920s. Nonetheless, by the end of the 1930s, personal loans were a standard part of commercial banks' offerings. The chapter then asks why banks would begin to loan to consumers in the middle of the 1930s when jobs were so precarious, rather than in the 1920s when prosperity reigned. In answering this question, one can see how powerful federal policy can be in transforming the most basic practices of capitalism, since it was through a previously overlooked federal program—the FHA's Title I loan program—that bankers learned consumer lending could be a good idea.Less
This chapter focuses on personal loan departments. On May 4, 1928, National City Bank opened the nation's first personal loan department. Curiously, despite the popularity of the department and despite the prominence of National City Bank—one of the country's largest commercial banks—few other banks opened their own personal loan departments in the late 1920s. Nonetheless, by the end of the 1930s, personal loans were a standard part of commercial banks' offerings. The chapter then asks why banks would begin to loan to consumers in the middle of the 1930s when jobs were so precarious, rather than in the 1920s when prosperity reigned. In answering this question, one can see how powerful federal policy can be in transforming the most basic practices of capitalism, since it was through a previously overlooked federal program—the FHA's Title I loan program—that bankers learned consumer lending could be a good idea.
Lyn C. Thomas
- Published in print:
- 2009
- Published Online:
- May 2009
- ISBN:
- 9780199232130
- eISBN:
- 9780191715914
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199232130.001.1
- Subject:
- Mathematics, Applied Mathematics, Mathematical Finance
Credit scoring — the quantitative and statistical techniques which assess the credit risks when lending to consumers — has been one of the most successful if unsung applications of mathematics in ...
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Credit scoring — the quantitative and statistical techniques which assess the credit risks when lending to consumers — has been one of the most successful if unsung applications of mathematics in business for the last fifty years. Now though, credit scoring is beginning to be used in relation to other decisions rather than the traditional one of assessing the default risk of a potential borrower. Lenders are changing their objectives from minimizing defaults to maximizing profits; using the internet and the telephone as application channels means lenders can price or customize their loans for individual consumers. The introduction of the Basel Capital Accord banking regulations and the credit crunch following the problems with securitizing sub prime mortgage mean one needs to be able to extend the default risk models from individual consumer loans to portfolios of such loans. Addressing these challenges requires new models that use credit scores as inputs. These in turn require extensions of what is meant by a credit score. This book reviews the current methodology for building scorecards, clarifies what a credit score really is, and the way that scoring systems are measured. It then looks at the models that can be used to address a number of these new challenges: how to obtain profitability based scoring systems; pricing new loans in a way that reflects their risk and also customise them to attract consumers; how the Basel Accord impacts on way credit scoring; and how credit scoring can be extended to assess the credit risk of portfolios of loans.Less
Credit scoring — the quantitative and statistical techniques which assess the credit risks when lending to consumers — has been one of the most successful if unsung applications of mathematics in business for the last fifty years. Now though, credit scoring is beginning to be used in relation to other decisions rather than the traditional one of assessing the default risk of a potential borrower. Lenders are changing their objectives from minimizing defaults to maximizing profits; using the internet and the telephone as application channels means lenders can price or customize their loans for individual consumers. The introduction of the Basel Capital Accord banking regulations and the credit crunch following the problems with securitizing sub prime mortgage mean one needs to be able to extend the default risk models from individual consumer loans to portfolios of such loans. Addressing these challenges requires new models that use credit scores as inputs. These in turn require extensions of what is meant by a credit score. This book reviews the current methodology for building scorecards, clarifies what a credit score really is, and the way that scoring systems are measured. It then looks at the models that can be used to address a number of these new challenges: how to obtain profitability based scoring systems; pricing new loans in a way that reflects their risk and also customise them to attract consumers; how the Basel Accord impacts on way credit scoring; and how credit scoring can be extended to assess the credit risk of portfolios of loans.
