Building a Profile of a High-Risk Customer
Based on the analysis performed in the previous sections, we can now build a profile of the customer who is most likely to default. With this predicted customer profile, credit card companies can take preventive steps (such as reducing credit limits or increasing the rate of interest) and can demand additional collateral from customers who are deemed to be high risk.
The customer who satisfies the majority of the following conditions can be classified as a high-risk customer. A high-risk customer is one who has a higher probability of default:
- A male customer is more likely to default than a female customer.
- People with a relationship status of other are more likely to default than married or single people.
- A customer whose highest educational qualification is a high-school diploma is more likely to default than a customer who has gone to graduate school or university.
- A customer who has delayed payment for 2 consecutive...