Credit Scoring—From Judgmental to Statistical Models

Credit scoring is a methodology and set of tools for evaluating the credit worthiness of customers by employing a formula or set of rules. Such sophisticated methods, also known as rules-based credit scoring, are in turn typically broken down into two major categories or models: Judgmental scoring model Statistical scoring model The two models have a good deal in common as well as significant differences. Which model an AR or credit department adopts will depend on the resources,…