Behavioral assessment of recoverable credit of retailer's customers

The increasing rate of late payments by credit card customers, which are caused by the recent economic downturn, is causing not only reduced profit margins but also significant sales losses for retail companies. Under pressure to increase revenues, credit prediction should be a part of customer delinquency management. In this study, a credit prediction model has been developed to manage delinquents holding retail credit cards. The hybrid model combines a Kohonen network and a Cox's proportional hazard model. A Kohonen network is used to cluster credit delinquents into homogeneous groups. A Cox's hazard model is used to analyze repayment patterns of delinquents in each group. The model estimates the expected time of credit recovery from delinquents. This model's prediction accuracy scored above 93%.