Which of the following is TRUE of credit scoring?
A)It audits the amount of assets the applicant has available for use in securing the credit.
B)It specifies the terms of sale for customers who have been extended credit by a firm.
C)It is an ongoing review of a firm's accounts receivable to determine whether customers are paying according to the stated credit terms.
D)It applies statistically derived weights to an applicant's scores on key financial and credit characteristics.

Question

Quizplus · Accepted Answer

Credit scoring applies statistically derived weights to an applicant's scores on key financial and credit characteristics, such as payment history, credit utilization, length of credit history, and types of credit used. This helps lenders assess the risk of extending credit to an applicant. Choices A, B, and C are incorrect because they do not accurately describe credit scoring.

Which of the Following Is TRUE of Credit Scoring