Credit Risk Modelling

Credit risk modeling is a way for financial institutions to assess how likely a borrower is to repay a loan. It uses data like credit history, income, and financial behavior to predict the chance of default. By creating these models, lenders can make informed decisions about who to lend to and set appropriate interest rates, balancing potential profit with risk. Essentially, it helps manage the uncertainty of lending, aiming to minimize losses while providing access to credit for responsible borrowers.