Which one of the following best defines the term 'credit scoring'?
A) Categorizing customers into groups depending upon the length of time it takes each customer to pay for purchases
B) Compiling a list of accounts receivables segregated by the length of time each receivable has been outstanding
C) Evaluating the opportunity costs of a credit policy
D) Process of quantifying the probability of default when granting credit to customers
E) Tracking of both the number and the size of customer orders over a period of time

Question

Quizplus · Accepted Answer

Credit scoring is the process of quantifying the probability of default when granting credit to customers. It involves evaluating the creditworthiness of a potential borrower based on various factors such as credit history, income, employment status, and other financial data. The goal of credit scoring is to assess the level of risk involved in giving credit to a particular customer and to determine the terms and conditions of the credit agreement.

Which One of the Following Best Defines the Term 'Credit