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FRM Part II · FRM Exam Part II · Credit Scoring and Retail Credit Risk Management

A bank uses a behavioral score to manage existing revolving accounts. Compared with an application score, which feature best describes the behavioral score?

A behavioral score uses recent account performance such as payment history and utilization, so it reflects how the customer behaves after opening the account. This makes it suitable for ongoing account management, unlike an application score, which relies on information available at origination.

  1. AIt relies solely on information in the credit application form
  2. BIt incorporates recent account performance such as payment patterns and utilizationCorrect
  3. CIt is used only to accept or reject new applicants
  4. DIt is unaffected by changes in customer behavior after account opening

Explanation

Behavioral scores update with account performance data like payments, balances and utilization, so they suit ongoing account management. Application scores use data available at origination and drive accept or reject decisions.

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