Optimization strategy of credit line management for credit card business

So Young Sohn, Kyong Taek Lim, Yonghan Ju

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

Adjusting the credit lines of card users is an important issue. It is essential to establish an optimized approach for credit card companies to identify the proper amount of credit to offer for their customers. Most of the related research concentrated on the prediction of credit card users? default. Our contribution is a consideration of a holistic and heuristic approach that looks at the credit line that maximizes the net profits of the credit card companies. We first apply regression models to find the probability of default of customer and customer?s current balance as a function of credit line. Next we use a regression tree to identify groups of customers assigned with the same credit line. The results are then used to formulate the net profit and genetic algorithm is used to find optimally adjusted credit line for each group of customers. It is expected that our study can contribute to present strategic guidelines for the management of credit lines for card companies.

Original languageEnglish
Pages (from-to)81-88
Number of pages8
JournalComputers and Operations Research
Volume48
DOIs
Publication statusPublished - 2014 Aug

All Science Journal Classification (ASJC) codes

  • Computer Science(all)
  • Modelling and Simulation
  • Management Science and Operations Research

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