Which of the following statements is true?
A)A credit scoring model is a mathematical model that considers a borrower's credit rating to make loan decisions.
B)A credit scoring model is a model that relies on expert knowledge to make loan decisions.
C)A credit scoring model is a mathematical model that uses observed borrower characteristics to calculate a score representing the applicant's probability of default or to sort borrowers into different default classes.
D)A credit scoring model is a mathematical model that uses neural networks to make loan decisions.

Question

Quizplus · Accepted Answer

A credit scoring model is a mathematical model that uses observed borrower characteristics (such as credit history, income, employment status, etc.) to calculate a score representing the probability of default or to sort borrowers into different risk classes. This score is used to make loan decisions, such as whether to approve the loan and what interest rate to offer. Expert knowledge and neural networks may be used in developing the model, but they are not defining characteristics of it.

Which of the Following Statements Is True