Consumer Credit Risk Characteristics: Understanding Income and Expense Differentials

Arslan O., KARAN M. B.

EMERGING MARKETS FINANCE AND TRADE, vol.46, no.2, pp.20-37, 2010 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 46 Issue: 2
  • Publication Date: 2010
  • Doi Number: 10.2753/ree1540-496x460202
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.20-37
  • Keywords: consumer credit, credit risks, logistic regressions, Turkish households
  • Hacettepe University Affiliated: Yes


This study investigates the consumer credit risk characteristics of Turkish households by analyzing factors related to their income and expense differentials. This study assumes that the income and expense patterns are the key elements of consumer credit risk. Based on a data set ranging from 8,551 to 25,566 households, during the period 2003-5, we employ a logistic regression method to model the determinants of income and expense differentials. We first concentrate on the income-expense balance of households to highlight those that are eligible for consumer credit. We reinforce our results by further analyzing the expenditure behaviors of households to find those that should be either primarily eliminated or targeted for consumer credit by financial institutions. Our overall results provide evidence on the factors identifying household income and expense profiles and, hence, consumer credit risk characteristics of Turkish households.