11-35 Credit scoring models are advantageous because of their ability to sort borrowers into different default risk classes.

Question

Quizplus · Accepted Answer

Credit scoring models use data and statistical algorithms to categorize borrowers into different risk classes based on their credit history and other relevant factors. This allows lenders to make informed decisions about whether to approve or deny loan applications, and to set appropriate interest rates and credit limits based on the borrower's perceived default risk. By sorting borrowers into different risk classes, credit scoring models help lenders manage risk and reduce losses due to default.

11-35 Credit Scoring Models Are Advantageous Because of Their Ability