Credit Scorecards

Credit scorecards are tools used by financial institutions to evaluate the credit risk of borrowers by assigning scores based on various factors such as income, credit history, and outstanding debts. They are typically used to assess the likelihood of default and are often customized for different types of loans, such as mortgages, credit cards, or auto loans. Scorecards help lenders standardize credit decisions and determine whether to approve or deny a loan application.

Example

A bank uses a credit scorecard to evaluate mortgage applicants, scoring them on factors like income, employment history, and credit score to determine eligibility for a loan.