Business credit-scoring models suffer from several weaknesses. These include which of the following?
I. Credit-score models are not statistically sound tools to use in making a lending decision.
I. The appropriate weights on a credit-score model are likely to change unpredictably over time.
II. These models ignore non-quantifiable behavioral factors,such as a relationship with the bank and reputation.
IV. Credit-scoring models discriminate against minorities.

Question

Quizplus · Accepted Answer

II and III are correct because credit-scoring models do face challenges with changing weights over time and the inability to account for non-quantifiable factors like relationships and reputation. The first statement is incorrect because credit-scoring models are statistically based, and the last statement is not inherently true about all models, as discrimination would be illegal and against fair lending practices.

Business Credit-Scoring Models Suffer from Several Weaknesses