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Understanding the impact of borrowers' behavioural and psychological traits on credit default: review and conceptual model

Akanksha Goel (Symbiosis International (Deemed University), Pune, India)
Shailesh Rastogi (Symbiosis Institute of Business Management, Symbiosis International (Deemed University), Pune, India)

Review of Behavioral Finance

ISSN: 1940-5979

Article publication date: 1 December 2021

Issue publication date: 14 March 2023




The purpose of the study is to identify certain behavioural and psychological traits of the borrowers which have the tendency to predict the credit risk of the borrowers. And the second objective is to draw a conceptual model that reveals the impact of those traits on credit default.


The study has adopted a systematic Literature Review approach to identify those behavioural and psychological traits of borrowers that reflect on the tendency to predict the credit default of borrowers.


The findings of this study have revealed that there are some non-financial factors, which can be looked into while granting a loan to a borrower. The identified factors can be used to develop a subjective credit scoring model that can quantify and verify the soft information (character and reliability) of debtors. Further, a behavioural credit scoring model will help in easing the assessment of those borrowers, who do not have an appropriate credit history and reliable financial statements.

Practical implications

The proposed model would help banks and financial institutions to evaluate those borrowers who lack substantial financial information. Further, a subjective credit scoring model would help to evaluate the credit worthiness of such borrowers who do not have any credit history. The model would also reduce the biasness of subjective scoring and would reduce the financial constraints of borrowers.


By reviewing the literature, it has been observed that there are very few studies that have exclusively considered the behavioural and psychological factors in credit scoring. Several studies have linked the psychological constructs with debts, but very few researchers have considered it while constructing a behavioural scoring model. Thus, it can be inferred that this area of behavioural finance is still unexplored and needs attention of researchers worldwide. In addition, most of the studies are carried out in European, African and American regions but are almost non-existent in the Asian markets.



Goel, A. and Rastogi, S. (2023), "Understanding the impact of borrowers' behavioural and psychological traits on credit default: review and conceptual model", Review of Behavioral Finance, Vol. 15 No. 2, pp. 205-223.



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