Risk Score

A risk score is a numerical value that quantifies the level of risk associated with a specific investment, business decision, or individual. Risk scores are often used in finance, insurance, and credit assessments to evaluate the likelihood of default or financial loss. The score is calculated based on various factors such as credit history, market conditions, or business performance. A higher risk score indicates greater potential for loss or default, while a lower score suggests less risk.

Example

A lender assigns a borrower a high risk score due to poor credit history and unstable income, indicating a higher probability of default on a loan.