An empirical Bayes procedure for the credit granting decision

The use of a simple Stein-rule method is discussed for estimating the repayment probability of a new credit applicant. It is argued that this type of procedure could provide a superior algorithm when a multiperiod view of repayments is taken and when there is a desire to balance the categorised estimate from the common discriminant scoring procedure with a fairer reflection of the applicant's actual performance.