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Beyond Credit History: Investigating the Psychological Characteristics of Creditworthy Borrowers in a Micro-Loan Context

Mladentseva, N. (2023). Beyond Credit History: Investigating the Psychological Characteristics of Creditworthy Borrowers in a Micro-Loan Context. (Unpublished Doctoral thesis, City, University of London)


Assessing the risk of loan non-payment (i.e., borrower creditworthiness) is an important and current problem in the credit industry. The over-reliance on credit history that is missing or limited for much of the population spurred on the use of alternative data (e.g., public records, mobile phone usage, social media behaviour) for assessing creditworthiness. Without understanding what drives much of the alternative data, however, applied researchers and professionals cannot guarantee whether their creditworthiness assessments are adequately valid and fair. Psychology and psychometric measurement of relevant characteristics is well-suited to study this, and yet there has been little research in the area. This is especially relevant for assessing creditworthiness for micro-loans (small, unsecured loans repaid in instalments over several months or years), since they are deemed more risky than traditional, larger loans. Therefore, the present thesis addresses this applied problem by undertaking a five-study investigation of the psychological characteristics of creditworthiness in collaboration with a UK-based micro-lender. This research (a) identifies the relevant psychological characteristics and (b) develops and validates a psychometric measure for use in the applied setting. The studies include a systematic literature review, semi-structured interviews with underwriters and customers, qualitative and quantitative pilots of the new measure, and a longitudinal validation study as part of the borrowers' application process. Overall, preliminary support for the psychometric measure has been found. The image-based creditworthiness measure is a valuable contribution to the credit risk assessment literature that with further research might provide a more fair and accurate approach towards creditworthiness evaluation.

Publication Type: Thesis (Doctoral)
Subjects: B Philosophy. Psychology. Religion > BF Psychology
H Social Sciences > HG Finance
Departments: School of Health & Psychological Sciences > Psychology
School of Health & Psychological Sciences > School of Health & Psychological Sciences Doctoral Theses
Doctoral Theses
[thumbnail of Mladenseva thesis 2024.pdf]
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