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Unformatted text preview: with highvolume/small-dollar credit
requests; relies on a credit score
determined by applying statistically derived weights to a credit
applicant’s scores on key
financial and credit
W Credit scoring is a method of credit selection that is commonly used with highvolume/small-dollar credit requests. Credit scoring applies statistically derived
weights for key financial and credit characteristics to predict whether a credit
applicant will pay the requested credit in a timely fashion. Simply stated, the procedure results in a score that measures the applicant’s overall credit strength, and
the score is used to make the accept/reject decision for granting the applicant
credit. Credit scoring is most commonly used by large credit card operations,
such as those of banks, oil companies, and department stores. The purpose of
credit scoring is to make a relatively informed credit decision quickly and inexpensively, recognizing that the cost of a single bad scoring decision is small. However, if bad d...
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