Evaluating the Likelihood of Using Linear Discriminant Analysis as A Commercial Bank Card Owners Credit Scoring Model

  •  John Mylonakis    
  •  George Diacogiannis    


The paper attempts to determine whether there exists a relationship between the on-time payments of credit card owners of a Commercial Bank and their demographic characteristics (particular personal and family status). It evaluates the statistical technique of discriminant analysis on credit card customers’ data of a Greek Commercial Bank and examine whether it is possible to create a model evaluating the credibility of prospective credit-card customer. The sample includes personal data, as well as, payment consistency for 829 customers of the Greek Commercial Bank (X-BANK) of average size.The statistical analysis of the sample data included the identification of the relationship between the theoretical and empirical prices of the distributions of the bank customers’ specific variables and discriminant analysis. The results showed that establishing a model to evaluate the credibility of prospective bank card customers, using the technique of the linear discriminant analysis, is not possible. The findings prove interesting and useful for all bank managers. The paper contributes to the financial services literature by adding a further critical analysis into credit scoring systems established by several banking institutions.

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