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

A card issuer reviews its portfolio of existing revolving accounts every month and uses a behavioral score to decide whether to raise or lower each customer's credit line. Which stage of the retail credit lifecycle does this activity most directly represent?

This is account management. Behavioral scores use the repayment and usage history of existing customers, so adjusting credit lines on them is an ongoing portfolio management task, unlike application underwriting, acquisition marketing or collections, which occur at other lifecycle stages.

  1. AAccount management of existing customersCorrect
  2. BCustomer acquisition and prospecting
  3. CCollections and recovery
  4. DApplication underwriting

Explanation

Using behavioral scores on existing accounts to adjust credit lines is account management. Application scoring is used at origination, and collections deals with delinquent accounts. Acquisition concerns attracting new customers.

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