Credit Scoring Policy
Jia's Jewelry uses the credit scoring technique to evaluate retail applications.
The financial and credit characteristics considered and weights indicating their relative importance in the credit decision are shown above. The firm's credit standards are to accept all applicants with credit scores of 85 or more, to extend limited credit to applicants with scores ranging from 75 to 84, and to reject all applicants below 75. The firm is currently processing two applicants. The scores of each applicant on each of the financial and credit characteristics are summarized above. Would you recommend either of these applicants for credit extension?
Credit Characteristics Applicant A Applicant B Applicant A Applicant B
Credit references 90 70 22.5 17.5
Education 80 95 4 4.75
Home ownership 70 50 10.5 7.5
Income range 50 95 15 28.5
Payment history 75 70 11.25 10.5
Years on job 80 70 8 7
71.25 75.75
Applicant A's credit score = 71.25
Applicant B's credit score = 75.75
Reject Applicant A and accept Applicant B on a limited basis.
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