How is a scoring model developed?
To develop a credit score model, a creditor selects a random sample of its customers, or a sample of similar customers if their sample is not large enough, and analyzes it statistically to identify characteristics that relate to creditworthiness. Then, each of these factors is assigned a weight based on how strong a predictor it is of who would be a good risk. Each creditor may use its own scoring model, different scoring models for different types of loans, or a generic model developed by a scoring company. Under the law, a credit score may not take into account certain characteristics such as race, sex, marital status, national origin, or religion as factors. However, creditors are allowed to use age in properly designed scoring systems. But any scoring system that includes age must give equal treatment to elderly applicants.
