Computational Method to be used by Financial Institutes to Identify Customer’s Credit Risk Anuradha Gamage Temporary Tutor in Social Statistics, Department of Economics, University of Ruhuna, Matara anuradhagamage5@gmail.com Abstract The study is to create a computational method on evaluating the customer credit worthiness. The main objective of the project is to identify the risk of default at the very first stage of starting the business with the customer. By identifying the credit worthiness at the first level, financial institutes can prevent occurrence of certain malfunctions. This risk evaluation model was build considering several factors both in customer and company side. After identifying the relevant factors they were implemented in the visual studio. This mini software helps to make a clear and quick idea about the customer’s creditworthiness at the first time. Since there are many financial institutes to lend or lease money, most of the institutes are now practicing to lend loans without guarantors or collaterals. As a result of that people are used to take loans from any place where they are treated quickly and friendly. Even though people try to take loans very quickly, they follow very slow methods in repaying them. Some financial institutes do not check whether the customer is able to repay or not. This computation technique will help these financial institutes to find out customer’s credit worthiness in other words customer’s credit risk before they lend a loan. Keywords: Credit Risk, Credit Worthiness, Default, KYC, Risk Factor Introduction This study carries out to build up a model to measure credit risk of the customers by considering customer and facility together and separately. The credit worthiness or the credit risk measuring is one of the major financial analysis method used in financial institutes, banks and other companies. Financial experts and statisticians used many methods to do this risk scoring. Credit risk occurs when the borrower doesn’t pay the money at the targeted time. It influences whole process of the financial company. Therefore researchers have found out a way to score the risk factors in order to calculate the total credit risk. Credit risk is defined as the possibility of losses associated with diminution in credit quality of borrowers or counterparties. Losses may result from reduction in portfolio value arising from actual or perceived deterioration in credit quality. Credit scoring Credit risk occurs when the borrower doesn’t pay the money at the targeted time. It influences whole process of the financial company. Therefore researchers have found out a way to score the risk factors in order to calculate the total credit risk. Credit Risk Analysis Credit risk is defined as the possibility of losses associated with diminution in credit quality of borrowers or counterparties. Losses may result from reduction in portfolio value arising from actual or perceived deterioration in credit quality. Direct Lending: Principal and/ or interest amount may not be paid Guarantees or Letters of Credit: Funds may not be forthcoming from constituent upon crystallization of liability