ScholarlyCommons

Title

Credit Scoring with Social Network Data

Author(s)

Yanhao Wei, University of Pennsylvania
Pinar Yildirim, University of Pennsylvania
Christophe Van den Bulte, University of Pennsylvania
Chrysanthos Dellarocas

Document Type

Technical Report

Date of this Version

2015

Publication Source

Marketing Science

Volume

35

Issue

2

Start Page

234

Last Page

258

DOI

10.1287/mksc.2015.0949

Abstract

Motivated by the growing practice of using social network data in credit scoring, we analyze 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 consumers can strategically construct their social networks to attain higher scores. We find that those who are motivated to improve their scores may form fewer ties and focus more on similar partners. The impact of such endogenous tie formation on the accuracy of consumer score is ambiguous. Scores can become more accurate as a result of modifications 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 effort that improves everyone's creditworthiness. We discuss implications for managers and public policy.

Copyright/Permission Statement

Originally published in Marketing Science © 2016 INFORMS

This is a pre-publication version. The final version is available at http://dx.doi.org/10.1287/mksc.2015.0949

Keywords

social networks, credit score, customer scoring, social status, social discrimination, endogenous tie formation

Recommended Citation

Wei, Y., Yildirim, P., Van den Bulte, C., & Dellarocas, C. (2015). Credit Scoring with Social Network Data. Marketing Science, 35 (2), 234-258. http://dx.doi.org/10.1287/mksc.2015.0949